The Eagle Ford play--Hint it is not a car dealership
Image via WikipediaThe boom is back, at least in the rural South Texas counties that sit on top of the Eagle Ford shale formation.And some of that money is coming from China.
Oil companies searching for drilling rights are making instant millionaires of some property owners — at least the ones who own the rights to what lies below the surface of land previously prized for deer hunting.
Those who own mineral rights are receiving bonuses as high as $1,000 to $4,000 an acre for the right to drill, in many cases outpacing the surface value of the land.
And that doesn't count the royalties that could roll in as production, which is in the early stages, increases.
Chesapeake Energy Corp. started calling Derry Gardner in March of 2009 with a bonus offer of $350 an acre for his La Salle County land. He finally signed with the company in February, receiving $1,700 an acre for his 200 acres.
"It paid for my property," Gardner said. "I still get a 25 percent royalty for anything they develop. I have neighbors and friends down here who have become millionaires overnight just from the bonus payment."
For almost two years, the Eagle Ford's potential has created a frenzied race by oil companies to secure drilling rights in the highly productive oil and gas formation and by individuals to purchase property with mineral rights still attached in hopes that an energy company will come knocking.
"When they're paying bonus payments for more than the surface is worth, it's just crazy," said Gardner, a San Antonio-based appraiser and broker whose land is in the epicenter of the Eagle Ford insanity. "Everyone" has been looking for land with minerals."
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This is another shale oil and gas play and it has the potential to make a lot of money for those who provide services to the drilling industry too. That would include motels and RV parks and restaurants. If Obama would get out of the way, other parts of the country could be participating in the energy business, but he and Salazar are bent on strangling domestic production where ever they can.
The lease bonuses you speak off are actually much, much higher than $4,000 per acre. Lease bonuses on well on the way to $30,000 per acre and 27 1/2% royalty in the oil window. Bonuses and royalty will set new high records in this play. Barnett and Haynesville saw $30,000 & 27 1/2% royalty and Eagle Ford is much, much more better shale with better economics than those. How high? Who knows, but much, much higher than you can imagine before it is over.
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