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I am a 24 year old petroleum geologist, and I want to start oil prospecting soon. Oil prospecting is basically finding where I think oil might be, leasing the land from the land owner, so that i have permission to drill there, and then finding an investor to drill it. I have several locations in mind and i was wondering what the general mentality was of farmers and land owners who I would be dealing with. Here are some pros and cons that i have already come up with:
Pros - Mineral rights are 1/8 of the oil produced (where i come from, Illinois)
- Land is leased by the acre for a set time (starting at 10$ an acre)
Cons - Land will be in use by other people, coming and going
- Oil wells can smell bad, if they live near by
- Crops may be damaged, although they are paid for by the oil producers
I would appreciate any feedback and feeling towards the subject, even if you are not a land owner.
As I'm a farmer/rancher that owns my mineral rights, and I'm in the middle of an actively producing area of gas/oil wells ... the landmen have been swarming around our area lately due to the latest well techniques allowing the production companies to be productive in places previously thought not accessible. We've already got gaslines in the area so a producing well can be put online pretty readily.
A couple of points:
1) 1/8 share, after all costs deducted to achieve production, isn't adequate. I'd want 1/6 share, and all the costs borne by the producer.
2) Try $1,000 to $2,000 per acre, at least in my known producing area. Show up on anybody's doorstep around here with a $10/acre offer and you'd be laughed off the place. I've several neighbors who signed the first offer they got in their ignorance of what they have on their sections of land at $25/acre. I told that landman what I expected, and he allowed that he'd go $200/acre. Adios, amigo. I've got another two bidders at closer to my number, just by asking other landmen if they were interested in my property. I understand the first fellow's game ... he's a one horse outfit and he's simply trying to play the margin between a low lease bid and assigning the rights at a higher price to a capable qualified outfit. I checked with the state board and nobody's ever heard of him, and they gave me the names of others ... we're an active enough area that landmen are advertising in the newspaper about wanting to lease land in the area.
3) You'd better have more than just yourself and a pick-up truck and a dog as a company I'd want to do business with. There's way too many issues involved, too many environmental aspects, too many details to attend to that an undercapitalized and small outfit can guarantee doing properly without leaving me a mess (and potential liabilities) or damage to my land ... and I'd want a right to review and approve anybody that you'd assign the lease to during your 5 year term, and some very clear definitions of what would allow an extension of the lease term.
Well, I am a farmer ... and if you knocked on my door wanting me to sign "something", would I? Hel* NO. Nor would most of the farmers/ranchers that I know, either. Most would take your contract offer to their knowledgeable attorney for review ... and if they're anything like my attorney, he's very familiar with these leases, knows the market in the area, and the established players. As I pointed out, if you're a newbie, a one horse outfit without a track record ... I would not do business with you. Nothing personal about this, it's simply business ....
Not having gone through it personally, but my dad has...I'd second what sunsprit said. One other consideration my dad insisted on was that the property be restored back to it's original state after drilling...whether a dry hole or not.
Sunsprit, it sounds to me like you live in Pennsylvania, or nearby. I aggree that the leases in that area are MUCH more expensive than southern illinois. I am currently working on a rig as we speak (or chat). But in southern illinois 1/8 is off the top, no expenses figured. Also, the lease usually states that the land is returned to normal, and damages paid for. Where i'm from that means filling in the pit and filling in potholes. In pennsylvania its a much different story, they bulldoze the entire area and bring in enormous rigs. But those are good points and i appreciate the feedback.
Yuo might find that you have alot more competition than you think. Its pretty common around where I live.It takes alot of money long before you satrt drilling and the bigger companies with very edxperienced paople are hard to compete aginst.
I've been searching around and I came across this site that has pages for both oil land and mineral rights land (as well as other energy land properties like geothermal, solar and wind). Maybe a source for more of your investigation: Oil Land For Sale and Mineral Rights Properties For Sale
Presently 14 counties in Southern Illinois are under FEMA disaster management. It will be years before it is fully recovered.
O & G production in Illinois has been regulated and inspected since 1939. Currently there is are 1500 operators with a combined total of approximately 33,000 wells that produce 12-13M barrels annually in Southern Illinois. The deepest well ever drilled was 13,000 feet. Peek production was in 1963 when 80M barrels were produced. Unless you are talking about injection wells (nearly 1800 exist), the average producing well is 2000 -3000 feet deep.
I am a 24 year old petroleum geologist, and I want to start oil prospecting soon. Oil prospecting is basically finding where I think oil might be, leasing the land from the land owner, so that i have permission to drill there, and then finding an investor to drill it.
In the great James Michener book "Texas" he tells a few stories of the fabled oilmen down there.
The summary statement and lesson to be learned is to distinguish between oil *workers* and oil *dreamers*.
Especially if it involves your own money.
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Oil Land
