And a fine predicament this is.
Just Friday, SEAPO (Southeast Arlington Property Owners) leaders announced they won an area neighborhood record $22,000-per-acre lease bonus, 25 percent cost-free royalty, and other provisions with Paloma Resources, which is signing leases there on behalf of Chesapeake Energy. The deal was done through a sealed bid process.
The bonus offer by itself has set Arlington abuzz this weekend. But now, neighborhood leaders confirm that agents for the rival Carrizo Oil & Gas have been going door to door over the last few days, offering a lease with a $25,000-per-acre signing bonus and 25 percent royalty.
Jim Colley, a lead SEAPO organizer, says the agents working on behalf of Carrizo portray their offer as better. But he said the situations aren't the same. The Paloma deal was one won through the bidding process, he asserts, while Carrizo's proposal is just an offer. The Paloma deal now has an inferior bonus, Colley concedes, but the "back end" will cost more, because the Carrizo-offered royalty subtracts production costs, he said. The Paloma royalty does not.
"Our people are pretty well educated" and will recognize the differences, Colley said.
-- Scott Nishimura
Just to be clear, the Eagle/Carrizo lease being offered door-to-door in our neighborhood deducts production and transportation costs from your royalties leaving you with much less than the 25% they claim to pay.
True, the SEAPO/Paloma/Chesapeake contract merely offers a $22,000 signing bonus, the highest ever by the way, but it is a no-cost royalty and you will get a full 25% share of your royalties making the SEAPO contract much, much more valuable over the life of the well which could be 20 to 30 years.
I've read the fine print and their $25,000 bonus offer is simply a lure for the unsuspecting to fall prey to. If their calculations of your total acreage do not also include the roadways and easements around your home, then your share of the $25,000 per acre that they offer might actually work out to be less than our $22,000 because we include roadways and easements.
Also, ours is a true contract where both parties sign. With the Eagle/Carrizo lease, only you sign - the corporation doesn't. Wouldn't you rather have the big gas and oil company make a commitment to you as well as you to them?
There are many other differences between the two agreements but the bottom line is that they are different and don't let anyone try to sell you on the fact that they're the same. That's their game plan so please do your research and find out for yourself which is better for your household before you decide.
Don't forget - it's YOUR mineral rights they need to lease. You are in the driver's seat and much more so when you're part of a large group that brings a force to be reckoned with to the negotiating table. Please don't let them fool you into a bad deal.
Posted by: Jim Colley | March 17, 2008 at 12:13 AM