As Ohio County Clerk Patricia Fahey and her staff continue recording oil and natural gas leases for Marcellus and Utica shale drilling, some companies are now purchasing minerals instead of merely leasing them.
WHEELING, W.Va. — It appears as if a slight shift is taking place in the local gas leasing rush, as at least one firm is now purchasing entire mineral tracts from Upper Ohio Valley property owners instead of entering into lease agreements.
The amounts offered for buying minerals can vary widely.
Belmont County Recorder’s Office data indicate Oklahoma City-based Westhawk Minerals LLC paid about $8,750 per acre for one particular 51.66-acre tract near Shadyside in November, while the firm tendered a little more than $6,000 per acre for another tract near Fairpoint in August.
In West Virginia, Westhawk paid about $6,667 per acre for land in the Bethlehem area, the Ohio County Clerk’s Office shows.
The firm paid amounts ranging from $3,000-$4,100 per acre in Marshall County, records indicate.
The practice can be beneficial for property owners, in that the up-front payment likely will be higher than what is offered through a lease agreement. But royalties are not included, and for tracts with true drilling potential this could mean the loss of hundreds of thousands of dollars over the life of a lease.
Tim Greene, owner of Land and Mineral Management of Appalachia and a former West Virginia Department of Environmental Protection inspector, said purchasing minerals instead of just leasing them is fairly common.
“Lots of companies just buy them and flip them onto someone else,” he said of the practice of the purchasing firm selling the minerals to another company. “But if they buy all the minerals, that is it. You won’t get any royalties or anything else.
“If getting $100,000 right now could change my life, selling out might be something I am interested in,” Greene added.
Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia, said some firms purchasing oil and natural gas minerals may already have agreements to transfer those properties to established drilling firms. Sometimes, companies do this so they can acquire the land at a lower price than they would have to pay if property owners knew the identity of the ultimate owner.
“It’s not atypical for one company to purchase minerals in hopes of selling them to a major company,” Burd said. “They may already have a contract with a major company, but there could be a non-disclosure agreement in place.”
Burd said mineral owner groups often form to negotiate better terms with a company. He said companies assembling blocks of acreage to sell to a driller is a similar scenario.
The Sunday News-Register reported on such a situation in 2010 during the early stages of the region’s drilling boom, when a company known as Ed Broome Inc. of Glenville, W.Va., sold 22,000 acres of oil and gas rights in Wetzel County to Chesapeake Energy for $22 million. Broome had speculated on the mineral rights over a period of years, and when the drilling boom began, he quickly agreed to the deal with Chesapeake.
Greene said a mineral owner may actually receive more money in a lump sum than they otherwise would, citing the fact that a driller may decide to never produce gas from one’s property.
“It’s all about how badly you need the money, and how long you are willing to wait to get that money,” he said. “By leasing, you are likely to make more money over time. But, you may not have that time.”
Messages left with Westhawk officials were not immediately returned. According to the firm’s website, it has more than 35 years experience in purchasing oil and natural gas assets.
“In the long term, we feel the oil and natural gas prices will generally trend upward and we believe buying oil and gas rights now is a good investment,” the website states.
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