Location

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Location

 The saying “location, location, location” puts to words one of the most important forces that will influence the oil and gas leasing deal.  The best negotiator in the world cannot persuade a Landman to give top dollar for a property that is miles from the nearest producing well.  On the other hand, the world’s worst negotiator should be able to get reasonable terms for a property located next to and in communication with a super well.  Thus, before entering negotiations for an oil and gas lease, you, the negotiator, should learn the locations of the producing wells closest to the property to be leased.   An easy way to get this information is to go to the on-line well map maintained by the State Oil and Gas Board of Alabama (http://www.ogb.state.al.us./ogb_gis/default.aspx).  If the property is close to a producing well, the Landman’s economic desire for the property will be greater than if the property is far away from any production.

 If a substantial amount of property is involved, retaining a consulting geologist or petroleum engineer to consult on the deal.  The consultant should know how close the property is to proven production and to known promising geological formations.  Usually only owners of very large mineral interests take this step.

Copyright 2011 by Edward G, Hawkins. All rights reserved.