Replies to post #29274 on Hemi Energy Group Inc. (fka HMGP)

[sneaky2]

Expert: Bob Von Rhee
Date: 12/1/2007
Subject: barnett shale

Question
I am in the heart of the Barnett Shale and have recently been approached by 2 companies. The other day, I received a lease document in the mail stating I owned .41 acres and they were offering $10,000.00 per net mineral acre. They enclosed a draft for $470.00, as they said representing the $10,000.00 per acre signing bonus. Am I missing something? Or is there a difference between acreage owned and "net mineral acres"? Thanks in advance for your help....P.S. We're still in the negotiating phase...

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Answer
Mike. In all liklihood there is nothing "funny" going on here. When a company leases within a townsite - within city limits the minerals are often owned in very broken fashion OR where there has been a lot of division of mineral ownership due to complex bequests over the years, they will typically do a thorough "ownership" review based on county courthouse records. This is especially true in such competitive plays as the Barnett Shale where lease bonuses are so astronomically high.

There is a difference between "acreage"and "net mineral acres". Works like this. If you own 1 acre and 100% of the mineral rights - you are said to own "1 net mineral acre (nma). If however, you and your sibling each own 50% of the mineral rights, then you would each be said to own 0.5 nma. 1ac X 50% minerals - 0.5 nma. Continuing, for example if your sibling willed his 50% of the mineral rights equally to his two children 50/50, then each of them would now own 25% of the mineral rights, and you would still own 50% of the mineral rights. See how this works? The concept of "net mineral acres" is a way to reflect the fractional mineral ownership beneath a parcel of land so that the lease bonus - paid on a dollars per net mineral acre - may be calculated properly. Odds are that you own a fractional mineral interest below a larger tract and the bonus you are being offered reflects that.