BP Landmen Set Up Shop in Columbiana County
LISBON, Ohio -- A land company based in Fort Worth, Texas, is canvassing eastern Ohio to take up where the Associated Landowners of the Ohio Valley, or ALOV, left off.
"We've come in to help supplement their acreage," says Kenny Gunter, president of Gunter Land Services LLC. "BP wants to add to it and we're the only one handling new acquisitions."
Earlier this year, ALOV helped negotiate leases with BP for 1,900 landowners in Trumbull County that covered about 86,000 acres. Now, the oil and gas giant is active in eight counties across eastern Ohio's Utica shale, which specialists believe holds vast deposits of profitable liquids-rich gas such as ethane.
"We're hitting our stride," Gunter reports, noting his company has been operating in Ohio since May and opened its new offices in Lisbon about a month ago. "We're hitting the numbers we want to hit," he adds, declining to say how many leases the land firm has signed over the last three to four months. "I think we'll get a nice block for BP to drill, hopefully sometime next year."
Gunter's says his land company has experience in just about every major shale play in the country, except the Bakken play in North Dakota and the Fayetteville play in Arkansas.
The Utica shale is drawing attention because of the possibility that its wet gas window commands more market value than dry gas such as methane, Gunter says. "It's one of the bigger plays in the country," he notes. "There are a few smaller plays emerging that are bigger than we thought, but a lot of companies are focusing on this area."
Gunter Land Services specializes in performing title and parcel research for oil and gas companies such as BP. The company is contracted to review mounds of records at county courthouses to determine and identify ownership of mineral rights on parcels of land.
Since BP has moved into the area, Gunter says his company has deployed more than 100 people to research land titles and help negotiate leases with landowners. "We have about 100 people coming in and staying here, working in the local communities," he says. About 15% of that workforce was hired locally, he adds
Gunter Land Services has opened three offices in the region: Canton, Poland and Lisbon. Employees from the three offices cover the swath of eastern Ohio that stretches from Trumbull to Guernsey County.
Also, BP has set up its own land office in downtown Warren and brought in 100 or so employees to work out of the Chase building there.
The greatest challenge facing landmen like himself is establishing trust with the landowner, Gunter says. "It's the biggest hurdle," he notes. "They don't trust landmen. While we're negotiating to a degree for BP's interests, at the same time we're keeping the landowner's best interests in mind. We're not going to do anything that takes advantage of the lease."
Speed is critical in the Utica shale, he says. Thus a contact is often extended and signed with the landowner before any title research is begun. "We take a very low-pressure approach, which seems to work. I've personally signed up about 40,000 acres since I've been in this business," Gunter relates.
This year, the company has helped negotiate leases representing more than 200,000 acres in plays throughout the country, the landman reports. The time needed to write a lease together often depends on the client, the type of shale play and where that play is located, he says.
In the East, for example, some records date back more than 200 years, and in some cases Gunter's researchers follow the paper trail to the very year that the U.S. government patented the land. "In Texas, we look back as far as 1845, the year it became a state," he says.
Most of the time, title researchers examine records to a point where attorneys and the land company feel comfortable about whether the title is “clean,” Gunter says.
In the Utica, researchers are looking back about 160 years, he says. "That's where we're capping it. After that, records get hard to find." Then, the landmen examine a document to determine whether its title has any defects and who owns the mineral rights to the property.
In most cases, it takes about two weeks to clear a title. In some cases, it's taken months. "I've seen 2,000 pages of documents just for a single tract of land," he recalls. Issues such as survivorship deeds where more than one party is involved, probate court challenges and cloudy records on previous mineral leases are factors that can slow the process. Meantime, Gunter land agents are busy negotiating with landowners on behalf of BP.
"About 60% of employees deal directly with the landowner," Gunter says. Often, landowners have an attorney review the lease and before giving the OK to move forward with the deal.
"We're busy," adds Ernie Basham, senior project manager at Gunter. "This is still new to me since we haven't drilled anything yet. But with as many companies that are here and the money pouring in, it's going to be phenomenal."
The leases BP has presented to prospective landowners are among the best in the business, he asserts. "It's 27 pages long, and it protects you in every way, shape or form," he says.
The Utica shale is still very early in its development, Gunter says, and its productive potential unclear. Based on other shale plays that the company has worked in, he says, the Utica appears to be the real deal.
"I think this play is going to last quite a while," he says. "All the signs are there."
Gunter sees development of the Utica shale as more deliberate and measured than other shale plays across the country where energy companies were locked in cutthroat competition, driving land bonus prices to record levels.
Just before the economy went bust in 2008, land bonus prices in Texas' Barnett shale hit an astounding $28,000 per acre, Gunter recalls. "It just got out of control, and now these companies are stuck with natural gas a $2.80 and they're struggling there," he says.
Landowners in the Utica shale have signed leases as low as $50 and acre and as high as $6,000. The Trumbull County deal that ALOV negotiated with BP paid landowners about $3,800 an acre.
Wet gases such as butane, propane and ethane are much more profitable in the commodities market, as is oil, Gunter says, which makes the Utica an attractive play. But energy companies are wary about getting entangled again with they faced in the Barnett shale, that is, paying too much for leasehold rights and then becoming strapped because of depressed commodity prices.
"The Barnett was a one-time fluke," he says. "I don't think prices will ever get like that again."
As for the Utica, more information needs to be assessed as companies probe across the liquids-rich areas in eastern Ohio and suspected oil windows further to the west, Gunter says.
"There's no way to know right now," he remarks. "Not until a year or two, when a lot more wells are drilled, will we know the true definition of where these windows are."
FIRST PUBLISHED in the September edition of The Business Journal. To subscribe, CLICK HERE.
Copyright 2012 The Business Journal, Youngstown, Ohio.
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