Companies Target OH Landowners to Buy Royalty Rights
A few weeks ago, MDN called attention to a new trend in the Marcellus and Utica Shale region—companies who want to buy landowners’ rights to future royalties (see this MDN story). It seems to be happening mostly in Ohio at the moment. These companies are offering to purchase a landowner’s potential future royalties for gas wells drilled on their property, paying them an up-front, one-time payment now. Think of those commercials you’ve heard where companies offer to pay lottery winners a lump sum now for the future long-term payouts, or settlements from a lawsuit with payments that stretch over years. That’s essentially what these companies are doing for landowners with leases in the Marcellus and Utica Shales.
Rex Energy has just completed drilling and fracking its first horizontal Utica Shale well in western Pennsylvania and plans to bring it online once a gathering pipeline to the well is completed in January.
Interest in Ohio’s Utica Shale gas is booming as evidenced by the ramp up in the number of drilling permits issued. More than half of all permits issued have come in the last three months.
A rather generic story put out by Reuters yesterday refers to Exxon Mobil’s interest in acquiring acreage in the Utica Shale in Ohio as a new source of oil drilling. Details are sparse about Exxon’s plans, but it points out the white-hot interest there is in Ohio’s Utica Shale since Chesapeake announced in July they have struck oil, as well as natural gas and gas liquids, in Eastern Ohio (
Ohio continues to be red hot with respect to leasing mineral rights for shale gas (and now oil) drilling. Some counties, like Belmont, can’t keep up with the lawyers and researchers who pour over property records at the County Recorder’s office:
Chesapeake Energy CEO Aubrey McClendon on Monday appeared on Jim Cramer’s Mad Money show on CNBC to talk about the company’s new, oil-rich discovery in the Utica Shale of eastern Ohio. He had some fascinating things to say, including that he expects there to be some 25,000 wells drilled in the Ohio Utica Shale, and that there will be $10 billion per year for at least 20 years (or $200 billion) of investments in the Ohio Utica Shale alone. Yikes! No wonder Gov. John Kasich is “gushing” about Chesapeake’s discovery. An investment of 1/5 of a trillion dollars is a major big deal for Ohio—not only for landowners but also for businesses and for those who will be employed by drilling and associated industries. You cannot overstate how important this discovery is.