Sunday, May 29, 2011

The Speculators Have Arrived

It's usually a positive sign when the speculators appear in a play.  That means that the play has reached some sort of "critical mass".  Recent announcements by Devon and Denbury appear to have excited the speculating crowd.  Landowners have recently been receiving higher offers from new parties who don't appear to be representing large oil companies.  A word to the "wise" landowner.  While most landowners focus on the bonus and royalty amount, don't forget that an experienced, well capitalized company could also drill some wells on your land that might provide monthly income for years to come.  Shale plays are costly and require a significant amount of capital to develop.  Beware of the "snake oil salesman" promising a few more dollars per acre.  They have arrived in the TMS with "product in hand".

5 comments:

  1. How can you distinguish between a speculator and a front man for a large oil company? I know of several larger drilling companies that have leasing agents leasing for them under never-before-heard-of company names.

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  2. FM,
    I always ask upfront who the agent is working for because there are a couple of companies that I will not work with. Been screwed once; they won't get the chance to do it again. If they tell me its confidential then I assure them I will keep that information secret. AND THEN I DO!!!! Don't tell anyone anything including your spouse unless you have utmost confidence that they will keep it secret. If you are looking for a larger than normal bonus and/or royalty then you have to do the same. Its no once's business but the company's and your's. I even bank outside the area. You just can't go spreading it to the "four winds" if you tell them you will hold the info in confidence. Personally I share information only that I'm not told is confidential.

    JoeAldridge

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  3. FM,
    If you have a large enough amount of acreage, you usually can use that as leverage to find out. Leasing under broker names is standard industry practice and we do it all the time for confidentiality purposes.

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  4. Is the technology really here to make the TMS work or are they just hopeful and rolling the dice because acreage is cheap and the price of oil is high?

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  5. FM,
    Every shale play has been a "dice roll" at the onset. The TMS is no different. Early on the risk is high and the entry price is low. With success, prices rise. With failure, prices collapse.

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