Replies to This Discussion

Permalink Reply by Jack Blake on August 27, 2008 at 16:49

I had my wife fax me my lease I have an addendum that says, "This lease shall not be deemed to cover and does not grant Lessee the authority to produce hydrocarbons between the depths of the surface of the earth and the stratigraphic equivalent of the base of the Cotton Valley formation".
I interpret this to say my Cotton Valley formation is unleased. What should I do?

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Permalink Reply by El Theo on August 27, 2008 at 16:53

If I were you I'd vote republican.

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Permalink Reply by Jack Blake on August 27, 2008 at 16:59

I'm just a countryboy and don't get what you mean mister.
Help a brother out here.

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Permalink Reply by Donna Thornton on August 28, 2008 at 7:49

LOL!!!! I like the way you think!

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Permalink Reply by Margaret Wren on August 27, 2008 at 17:04

Talk to your friend, find out for sure, they may have some advice for you. Keep us posted please, as I am sure there are others in a similar position. I would interpret it the same way you do.

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Permalink Reply by Two Dogs, Pirate on August 27, 2008 at 17:07

You are a good man for leaving others the chance to produce from surface to the base of the CV. Give the small mom and pops a chance to wiggle around in this play. If the lease says to the bottom of the CV then that is probably what it means, you will need to talk to an attorney.

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Permalink Reply by Grillin' - MmmMmm on August 28, 2008 at 6:36

I just read a report from TudorPickeringHolt related to the Haynesville. In this report it says that the conventional Cotton Valley developments will suffer greatly from the Haynesville drilling. Here's why: the HS wells are very high pressure; the CV wells are much lower in producing pressure. The HS wells will raise the pressure in the pipelines and gathering systems, and essentially "backing out" the CV production unless the producers install compression. This is expensive and in many cases it won't be installed. The CV wells will flow at greatly reduced rates and there's not much we can do as mineral owners. UNLESS the CV well stops producing for however long your lease has for production requirements. What may happen will be the CV wells will be shut in for x days and then turned on for 4 or 5 days since the pressure will be temporarily higher. This will be balanced to ensure they keep production as "continuous" production as per your lease.

Plus, getting rigs, pipe, people, etc. is very difficult with the ramp up in HS drilling. So the mom and pops will struggle to get rigs, pipes, etc.

Bottomline: CV royalty bonuses won't be accellerating very soon.

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Permalink Reply by Grillin' - MmmMmm on August 28, 2008 at 6:56

Agree on the royalty. I think going into 2009 you'll see issues with rigs and frac equipment and crews. You'll also see tubing shortages across the country, not just HS/CV area, that's what I meant by pipe, not pipelines. And all of these companies are struggling to get enough engineers to work these plays. CHK is paying 6 figures for guys with very little experience and everyone is stealing employees from one another.

Again, this isn't just my opinion but those of specialists in teh area. Go to Tudor Pickering Holt's website. They had an email report on this very subject.

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Permalink Reply by Grillin' - MmmMmm on August 28, 2008 at 7:00

Very much so...time to dust off!!

Getting tubing is very hard...take my word for it!!!!!! The Chinese are coming to the rescue for some....aaaarrrggghhhhh.

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Permalink Reply by Snake Stewart on August 28, 2008 at 0:18

That CV keeps getting deeper every day it seems . These leases aren't for us rookies to play with. Good luck Mr. Blake , So sayeth Snake!

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Permalink Reply by Grice on August 28, 2008 at 1:54

I deleted my original post, as it was inaccurate.

However, since you have a clause that limits the depth to below the CV, how enforceable would the lease be if they are permitted to go into the CV? Would the allowance of the CV void the entire contract?

Please let us know what you friend says about this, as he was the one who initiated the clause.

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Permalink Reply by jkw3 on August 28, 2008 at 3:54

If the Conservation Commission does unitize the Cotton Valley formation and Shell is designated operator it will only be because Shell owns the largest percentage of leasehold in the unit. If Shell is the operator then they have the right to as much of the surface in the unit as is reasonable to develop the minerals - whether it is covered by a Shell lease, another company's lease or is unleased. Prior to operations surface use agreements are normally negotiated so that the surface owner (who is often different than the mineral owner or an unleased owner or if there are no surface use provisions in the lease) is justly compensated. That is not always a smooth, simple negotiation, and there has to be reasonable give and take on both sides. Naturally surface owners feel that operations on their surface is an intrusion on their rights, but for oil and gas to be produced, there has to be a surface locations for the well, equipment and pipelines.

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