How Much Per Acre For Eagle Ford Shale Gas Leases?
The Eagle Ford shale is the nation’s hottest oil and gas play and oil companies are paying top dollar for leases in areas where the concentrations of oil and natural gas liquids are the highest. The Eagle Ford shale is a rock formation that covers a broad, crescent shaped area that runs from the Mexican border to southeast Texas. Landowners lucky enough to own mineral rights in areas considered to hold natural gas and oil are being approached by landmen, or representatives of oil and gas companies with offers to lease their property. Oil companies are interested in everything from half- acre city lots to multi-thousand acre ranches and the amount of lease payments per acre are all over the place. There have been Eagle Ford shale leases made early on, in potentially marginal areas to the north and south of the main play, for as little as $50 an acre. Some savvy landowners in areas where the production is expected to be incredible, have held out for over $6000 dollars or more per acre. (There are some crazy figures being thrown around these days, who knows what is true at this point.) When you hear figures such as “$22,000 paid by Marathon Oil for Eagle Ford acreage”, realize these numbers are not what landowners are receiving, but are what was paid in transactions between corporations holding already leased land.
How Much Is My Land Worth Per Acre For An Eagle Ford Shale Oil Lease?
Your bargaining power depends on how hot competition is among oil companies for land, how close to producing wells you are and how prolific they are, if you are in the “oil – wet gas” windows of the play, thickness and quality of the shale in your area, the current price of oil and gas and last but not least, how much land you have.
If you are one of those landowners that has not signed a lease yet it is imperative that you consult with a good oil and gas attorney. Aside from reviewing any offers that you have received, they may have some inside knowledge of what the going rate for Eagle Ford shale leases is in your area. You may also want to have a conversation with your friends and neighbors about what offers they have received. Some may be unwilling to disclose what they were paid (most oil leases include a nondisclosure clause) but you may get a ballpark figure.
Why Some Acreage Is Worth More To Oil Companies
All Eagle Ford shale lease acreage is not created equally. Some areas within the shale will prove to produce high volumes of natural gas, others high volumes of oil or condensate. There are marginal areas where little or no production will occur. For the most part, shale plays, like the Eagle Ford, Barnett shale, and Marcellus shale are semi-uniform, in terms of making a producing well near another producing one. EOG Resources, for example, has drilled over 100 wells and not had a “dry hole” in the Eagle Ford shale.
Where Eagle Ford Shale Price Per Acre Is Highest
In the central, “over pressured” area of the Eagle Ford sale, or the “wet gas and condensate – volatile oil windows,” some very high producing wells have been made. Prices per acre for Eagle Ford shale oil leases in the liquids rich zones have reached record levels.
With oil and gas lease rates per acre of between $200 and $6000+, with varying amounts of royalty agreements, it pays to be informed.
Here is a document listing some things you should consider when leasing your land for oil and gas exploration. It is a bit outdated, and contains some advice that does not pertain to Eagle Ford shale leasing, but nevertheless it will give you an idea of things to consider when leasing your land for oil and gas exploration.
oil and gas lease
Another document about oil and gas leasing from Texas A&M University can be found here: Oil and Gas Leasing Tips
We also recommend joining the following site, Shale Landowners Mineral Rights Forum, to learn more about oil and gas leasing, pipeline ROW contracts, etc.
The Case Against Greed
Here is just something for everyone to ponder. I’m not an O&G landman or big landowner, etc. As a former oil and gas industry employee who worked in horizontal drilling in the Barnett Shale, I started this site to help folks understand what the Eagle Ford shale is and what it is about to become. For small landowners (less than 300 acres) it’s definitely not just about “price per acre” for leases when so much royalty income is at stake. A few months production could make your price per acre for leasing seem like “chump change”. A royalty share of 25% is commonplace in the Eagle Ford shale. Under such terms, the landowner receives a quarter of the revenue from an oil or gas well as long as it produces.
Even with well spacing of around 140 acres, oil companies like a large amount of land on which to drill multiple laterals, dig frac pits, drill Carrizo water wells, etc. There is still lots of country to be drilled and many large ranches to drill on with ideal conditions so smaller tracts of land are less desirable. A competing company is less likely to get into a bidding war for a 100 acre tract in the middle of someone else’s territory . In areas where the land is all divided up, a few “hold outs” may just end up putting off the major oil company who is leasing most of the area, and they might just move on elsewhere for the time being. Laterals of several thousand feet may cross numerous parcels and if there is a landowner holding out because they heard “somebody”, somewhere else got $10,000 an acre when the going price in your area is $1000 an acre, larger companies may get tired of playing games just pass the acreage by, letting leases expire. There is a shortage of frac equipment, trucks, rigs, etc. right now and companies like EOG Resources and Chesapeake are prioritizing what will get drilled and what will not. Not all the land leased on three year terms will be drilled. Big ranches will come first.
Developing this oil play is more like a predictable manufacturing operation, rather than how oil wells were drilled in the past vertically, low tech and with lots of uncertainty. A lot of money and machinery all need to come together in one place and the more room there is, the more that can get done.
The highest price per acre for Eagle Ford oil and gas leases right now are in the “oil and wet gas windows”, are on big acreages, and are free of hassles like landowners nickel and dimeing over lease payments or heirs squabbling. O&G companies are first going where it is “easy and there is oil”. These are just a few things to think about when offered an oil lease on your land.
As a small landowner, if you get a good offer from the oil company who has leased up most of the land around yours, you might do well to take it. Greed may very well backfire on you, and have repercussions for all the other landowners around you. These are just my thoughts and are no substitute for the advice of a good oil and gas attorney.
Previously we asked readers to use the comments section below. Now, please visit this site, The Eagle Ford Shale Mineral Rights Owners and Landowners Forum where you can ask questions and communicate with other landowners.