Question-and-Answer Session
Operator
(Operator instructions) The first question comes from the line of Robert Lee – Zimmer Lucas.
Robert Lee – Zimmer Lucas
I had a question about your Marcellus Shale opportunity and I just wanted to clarify some of the numbers. Is that 30% of 21,000 so your net is 6.3?
Ed Graham
Yes.
Robert Lee – Zimmer Lucas
So of that 6.3 you effectively pay $2 million to get the 6.3?
Ed Graham
Yes.
Robert Lee – Zimmer Lucas
That 6.3 was sold to St. Mary’s?
Ed Graham
To be clear there, we have 30% of the whole 21,000 acres. It is not a specific acreage of the 21,000. We, along with our partners, own the whole 21,000 acres and lease it to St. Mary’s for the next 7 years.
Robert Lee – Zimmer Lucas
So basically 21,000 gross acres was leased to St. Mary’s.
Ed Graham
Yes.
Robert Lee – Zimmer Lucas
But you receive a lease payment from St. Mary’s for your 30% of the 21 acres?
Ed Graham
Yes. We received an upfront bonus payment that we are recognizing over the life of the lease and have an opportunity to earn royalties and working interest.
Robert Lee – Zimmer Lucas
What is the life of the lease? Is it like 5 years or something?
Ed Graham
The lease is 7 years and there are points throughout the lease they are required to do a certain amount of drilling. It can be extended beyond 7 years.
Robert Lee – Zimmer Lucas
So it is a 7 year lease with an option for renewal?
Ed Graham
Yes.
Robert Lee – Zimmer Lucas
Within those 7 years how many wells need to be drilled?
Ed Graham
That is something that is not publicly disclosed by St. Mary’s so I am not allowed to say.
Robert Lee – Zimmer Lucas
Did you publicly say how much you received in the upfront lease payment?
Ed Graham
The upfront payment our portion I believe was $7.5 million.
Robert Lee – Zimmer Lucas
7.5 on 6,300 acres?
Ed Graham
Yes.
Robert Lee – Zimmer Lucas
Right now you are getting overriding royalty interest from the production?
Ed Graham
We hope to as they start to bring on wells.
Robert Lee – Zimmer Lucas
Have you publicly disclosed what that royalty percentage is?
Ed Graham
No. that is another thing that St. Mary’s wants to remain confidential.
- To read the full transcript on Seeking Alpha, click here »
