What is a Buyer to do about the Eagle Ford Shale?

The Eagle Ford Shale has oilfield activity occurring over much of the South Texas region that I, as a Texas farm & ranch broker, work with buyers and sellers on everyday.  Predictions are that this production could last most all of our lifetimes.  The Eagle Ford Shale has made it almost impossible to find Texas land for sale located in this region with minerals, with no existing production, or that has not already been leased for production in the future.

So what options does that leave a buyer who is looking to buy land in this region?  Most buyers in this region are hunters looking for a great hunting ranch or even a cattle ranch.  Much of the Golden Triangle and the surrounding counties are being affected by this Eagle Ford Shale play.  All one has to do is look at the latest map of permitted and completed wells to know that what was once land used mainly for hunting and cattle production is now littered with oil/gas wells along with the increased population and road traffic.  The main focus of the play right now is in Dimmit county, La Salle county, McMullen county, Webb county, Karnes county and Dewitt county.  There is currently some play in Maverick county, Zavala county, Frio county, Atascosa county, Wilson county,  and Gonzales county.

A buyer has a couple of options to consider.  They can do the obvious and look for ranches outside of the Eagle Ford Shale play.  This does not guarantee that production will not happen in the future but it may help you in obtaining a ranch with some minerals.  It is my opinion from what I have been hearing, that pretty much all of this land down in this part of Texas is sitting on some sort of deposit.  It will be money and technology that will drive this play into other counties and ranches.  For now, buyers have good wildlife habitat to look at in places like Duval county, Live Oak county, Jim Wells county, Bee county, Goliad county, Refugio county and more.

The second option a buyer has is to understand that a lot of these great hunting ranches will either have existing production, production in and around the ranch, or will have production in the near future.  Simply stated, if you buy land with no minerals and there is production, you will not be compensated for the production.  Minerals can be negotiated a thousand different ways on a sale.  It can get very complicated.  A very good oil & gas or mineral attorney will be a must in many of these types of transactions.  The buyer has to make sure that they are protected and compensated in every way possible.  So, if you as a buyer have made the decision to buy a ranch with existing production, one of the thing you will want to do is ask for a copy of the current Surface Use Agreement (SUA).  The SUA is for the land owner who may or may not own any minerals.   The SUA, in its basic form, is negotiated compensation for damages caused by the oil company building roads, pad sites, etc.  It states the agreement between the land owner and the oil company on what and how the oil company can operate on the landowners property.  As a surface owner, oil production can provide you with not only surface damages, but maybe a new water well, caliche roads, and even pipeline senderos which you can plant and manage as food plots..

The truth of the matter is the Eagle Ford Shale appears to be here for the long haul and buyers will simply have to weigh the pros and cons and adjust.  That is why a buyer must find an experienced, competent and knowledgeable Texas farm & ranch broker to guide them through this process.  Please contact us today if you are interested in buying or selling a ranch in the South Texas region.

  • Real Estate News
  • Apr 8, 2013
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