Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on January 31, 2012 at 11:36

It's possible but doubtful.  Encana has been lowering it's Haynesville rig count for some time.  They still have 6 rigs currently drilling in the LA. portion of the play.  I suspect that the particularly rig you refer to is one of the ones moving to another play however ECA has about 8 permits for Unit wells that I think will get drilled to HBP the minerals.  I also think it is likely that many of the current permits for Alternate Unit wells will go undrilled.  The reports that I have seen appear to support the $3.50 per mcf break even point.  ECA needs more oil and liquids in their production mix.  Hopefully they will find it in the TMS play.  Their TMS operations seem to be ratcheting up of late.

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Permalink Reply by cocodrie man on January 31, 2012 at 11:52

I note on Sonris Lite that Encana permitted five wells in Red River Parish on January 26, 2012.  Some were first wells in a unit but most were alternate wells.  If Encana is not going to drill any additional wells in Red River or the Haynesville, the decision must have been made recently and quickly. 

Oddly enough, my home is in the TMS area and Encana is in pursuit of a lease on the parcel I have here. I have not leased here in West Feliciana Parish because the bonus offered seems low.

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Permalink Reply by Skip Peel - Mineral Consultant on January 31, 2012 at 12:01

ECA permitted a unit well on Jan. 27.  And there are quite a few Alternate Unit wells with existing permits.  Of course it's easy to drop some or all of the alternates and wait for an improved market.  The unit wells are a different matter.  I think they will get drilled as part of the wind down strategy.

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Permalink Reply by cocodrie man on January 31, 2012 at 12:04

As always, thank you for your informative and thoughtful replies.

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Permalink Reply by GoshDarn on January 31, 2012 at 12:14

Cocodrie:

If EnCana offered you in WF what they offered a good friend of mine's family in Nov. (a family that goes way back with about 250 acres) . . . I understand your thinking.

Plus, I have family in RR Parish with hundreds of acres under lease to EnCana, too.

Only in the last few months have I begun to track the TMS info.  It's a complex puzzle.

That said, at least you have the knowledge you've garnered via GHS over the length of your membership.  If my friend's family member who negotiated with EnCana for that family's WF and EF land to lease had had your GHS knowledge, I'd bet the terms would've been much more favorable.  (Clauses, anyone?)

Nevertheless, I also know how a pullback, downturn can hammer a lease negotiation.  So, at this point, I can only say I'd take a wait and see attitude if I was in the TMS and had a low offer.  And I say that knowing that the lessor has to realize and be accepting of no money at all in the immediate future if this play/trend/concept -- whatever it truly is -- doesn't unfold as expected.

That said, and since this is free advice (and we both know what that's worth) . . . my gut tells me that the TMS hasn't been well defined as to sweet spot as of yet (if there is, in fact, a true sweet spot).  Some of the late 2011 news reports coming out of S. La. mentioned such-and-such a sweet spot . . .

But from my rather limited understanding, I'm not sure if the reporter had a good source or even knew if the term was an accurate statement.

So, I'm not qualified to be 100% sure on any of this.  Maybe my friend's family made the right decision to lease with EnCana under those low terms (i.e., maybe it was the right decision for them).  Maybe the future will prove them right.

But if it had been my land, I know -- from my experience in the HA and my leasing history with a number of operators -- I wouldn't have taken EnCana's offer.  I would've negotiated it and been willing to wait.  And dumb me, I might have or will have come up a big-time loser if it all, um, goes south (as they say).  But in my circumstances, I'm willing to take that risk of zero money.

Not everyone is.  Like I said, it's a complicated puzzle.

Good luck.

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Permalink Reply by jeff on February 2, 2012 at 4:19

Interesting post, Gosh Darn, The TMS is likely to play out like the Barnett/Woodford Shale lease boom and bust out in the Delaware Basin. I had put a lease block together while the first test wells were being drilled. Lots of leasing going on by Encana,XTO,Chief, Alpine, Forest etc..

It was a major land grab. When it was all said and done it was a big flop. I had conversed with some local drilling and geological consultants before I spent any lease money.They claimed it would not work, that the shale was a different creature in the Delaware Basin. Did I listen? No.

At that time acreage was leasing for an average of 100 per acre and a fifth up from 30 after the locals started talking. AS usual the mineral owners started holding out for more and many lost out while holding out. Kinda sounding like what I am hearing now. Well remember the old saying,, pigs get fed and hogs get slaughtered. I am not blaming a man for negotiating the best deal he can but some times over reaching and playing hardball can create missed opportunities. Ask the hold outs here in the Fort Worth Basin, remember pre Sept. 08, 27k per acre, hold outs wanted more., Then the meltdown and no offers.  

With this particular play Chesapeake was a late comer. Fortunately they bought all my acreage and just about everyone else's and soon became the gorilla. Saved my a#$.

 Well, the shales in the Delaware Basin dont work and leases expired the sizzle was gone and some got their bonuses and the hold outs....well you know.    

I have opinions from local Geologists regarding the TMS it is reminiscent of the Delaware Basin. The TMS will not work in central LA. The eastern part of the state is a different story.

I hope they are wrong but I wont make the same mistake I made out west.

  Good Luck to all!

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Permalink Reply by GoshDarn on February 3, 2012 at 4:53

Thanks for the insight, Jeff.

I wish CHK would find a Polish horizontal O&G who's battin' zero in, um, Poland on their gamble there . . . so as to help CHK sell off their Ashland, La., units . . . so CHK can make some more big-time money on a flip to the smart foreigners, telling 'em that this is the time to double-down and buy low NG shale while NG is at a decade's bottom.

Buy low, sell high.  Can work in NG shale, too.  Not just Wall Street.  Just gotta believe.  Bring your Euro's and forget your sovereign debt woes.  Uncle Sam's outback is "da place to be."  Ashland, La.  We'll treat ya right, cher.

So, y'know, if you have any gris-gris left with Big Aubrey McCl., please put a bee in his ear, would ya, Jeff?

No, I'm not joking.

I'm just riffin' off your horror story.  I wish CHK would come and save my $@ss.

Hey, we both know Doc Pennington smelled something somewhere to the east with the TT to lease his blocks, right?

Then again, even though your D. Basin nose could be spot-on -- yet since I have no dog to the west since one of my ol' friends with land around De Ridder hasn't called yet -- I guess I'll keep me eyes on the tracts me ol' buds have kennels on (so to speak) N. of B.R.  Yep, still have a soft spot in my heart for N. Bloody Tang. and for St. Helena parishes, but it's just those bygone memories from the good ol' days with the B.R. buddies, i.e., it's not like I know a good water witch for finding TX tea (I don't think).  

That said, I truly hope all of the TMS is oily productive.  Too much blood and too much family and history in the Purchase for me not to want what's best for my home state, cher.

Anyway, thanks for the feedback, Jeff.  It's appreciated.  Don't be a stranger.  Keep us in the loop when ya hear some good intel.

 

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Permalink Reply by dbob on January 31, 2012 at 14:26

I have it on good authority that Encana will be moving a low rig count: possibly  one/two rig in Texas and one/two rig in LA/MS soon.  That said, I think there is a good chance they will continue in JV work.  The reported hedges will help them in the next 18 months, but some of their debt service could get scary if interest rates rise but the price of gas doesn't.  However, their estimated production in 2015 from Haynesville calls for doubling production vs current level - it will take a lot of activity to actually hit that number... 

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Permalink Reply by Skip Peel - Mineral Consultant on January 31, 2012 at 14:38

dbob, it may be of greater value to discuss ECA contract rigs by play as opposed to state.  My latest rig report shows 8 LA. rigs, 6 in the HA and 2 in the TMS.  I wouldn't be surprised to see some of those 6 change plays but not states.  Of course one or more could also go to the TMS in MS where ECA has substantial undeveloped leasehold.   In Texas ECA has 4 contract rigs and only one is currently drilling in the HA.  The others are in Leon and Robertson counties.  The reassignment of drilling assets is already well underway.

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Permalink Reply by dbob on January 31, 2012 at 14:57

Skip

I don't know the specifics of their contracts, but contact was adamant that the rig count was coming down fast and soon.  Encana leasing was drying up in certain areas as well.   I do think there is a possibility the rigs will stay in state or in play, drilling for others.  The signs I see put Encana in a cash preservation mode, possibly for an extended period.  That could simply mean JV development rather than Encana operated development.  

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Permalink Reply by Skip Peel - Mineral Consultant on January 31, 2012 at 15:02

Dbob, if it's that serious ECA may be headed for a fire sale.   I think the company would be a good acquisition target for a major.

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Permalink Reply by dbob on January 31, 2012 at 16:57

Skip, 

I read the tea leaves to suggest they are positioning the company to avoid a fire sale, but setting up the company to avoid a rough 2013 - http://www.encana.com/pdf/investors/presentations-events/corporate-...

see page 11 - their hedged volume drops to about 0.5 bcf/day from a current 1.8 to 2.0 bcf/day.  

2014 may also be a challenge as some debt comes due, and if NG prices are low, and interest rates increase (where can they go from here?) 2014 could be pretty rough.  I think they are working to use third party capital/JVs to develop their oil and NGL holdings.  

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