I think I've gone MAD., page-27

If asset prices have not fallen in line with the POO as many commentators are suggesting, as carpenter suggested they are probably looking at leases in the interim. They've filled 3 of the 5 vacancies with the landman vacancy still advertised. The landman is the person that goes to the landowner/farmer and negotiates the mineral rights. Unlike Australia, US farmers earn good income from leasing their mineral rights and are eager to do so. Royalties use to be 1/8 or 12.5%, but in sought after areas the rate has got to 25%.

I'd suggest with Oil at $42, not many new leases are being taken up & landowners are making the lease terms more attractive to get this "free" income. So greenfield lease terms are probably becoming quite attractive compared to acquiring the mineral estate. From what I've researched, lessee's pay a bonus (upfront payment) typically $200-500/acre and a royalty 12.5 - 25% once production starts.

The lease mentioned in the last Quarterly must be capable of providing a return on current prices, otherwise they wouldn't bother. As they said it meets their criteria.

If MAD can get some quality leased acreage on favourable terms & conditions while oil is unloved they'll do very well in the long term. Although a lease is for a defined time such as 3 years, most contracts have a HBP clause (held by production) so the lease is automatically extended once production starts. MAD just need to start production on these leases, if the acreage is good (and they are only looking at prime acreage) they'll at least break even and keep the lease alive for better times. They also would only need minimal drawdowns on their US$500m facility.

As MAD has reported, they have spent considerable time constructing financial models, so they will lease or acquire depending on the economics, at least there is some action happening. As I type, WTI crude is $41.82 thank god they have been patient, the POO can't be sustained long term at this rate.