Replies to This Discussion

Permalink Reply by Bill on May 23, 2012 at 19:54

I was offered a 2 yr extension at almost 10 times what they gave me in 07. Prolly shoulda took it but i kinda want out of my current lease. Thats the reason its "take it or leave it". Its an extension of your old lease.

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Permalink Reply by Henry on May 23, 2012 at 23:14

Talk to other landowners in the section who aren't leased.  See what they are thinking and what offers they are getting.  It might be that by banding together, you can strengthen your negotiating position and get a 25% royalty. 

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Permalink Reply by Skip Peel - Mineral Consultant on May 24, 2012 at 1:30

I have heard of several offers in the area of the Encana unit south of Barksdale.  If not for the base EnCana would have formed a 1280 acre unit so if you have concerns of dilution the unit size is actually good.  However mineral interests in larger units get more wells and the royalty income is comparable to being in a 640 acre unit with only 8 HA wells.  Regardless under LA Force Pooling statutes you don't have a choice so It's better to focus on what you can negotiate.  Royalty is more important than bonus especially in a de-risked area such as S Bossier.  You might consider negotiating a lower bonus for a better royalty but make sure to get all the standard beneficial and protective lessor clauses.  If there are other mineral owners who have not agreed to an extension the holdouts may get better terms than those offered currently when EnCana is ready to drill.  Much depends on how many with significant acreage are willing to wait and how many acres you own.

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Permalink Reply by HBP on May 24, 2012 at 2:44

My two cents:  Agree on maximizing royalty in an area like that if possible.

"However mineral interest in larger units get more wells..."  Skip's right if the operator chooses to efficiently drain the unit.  But try putting that in the lease - probably no chance currently, because once it is unitized and HBP, the "more wells" are at the operator's discretion.  But of course sometimes it is necessary and helpful on both sides to form these larger units due to geographical or geological (fault) issues.  I assume the Barksdale region is a geographical issue.  But in some cases I just wouldn't assume it is mutually beneficial for every application.

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Permalink Reply by Skip Peel - Mineral Consultant on May 24, 2012 at 3:01

Right you are, HBP.  IMO operators such as EnCana always attempt efficient drainage by their definition of such.  And EnCana has experimented more than most in how to accomplish that.  We can now clearly see the predominant general trend in infill development.  Operators are drilling multiple unit wells in chosen units and in some cases the maximum allowed alternate unit wells.  Under that scenario the question for lessors becomes, "do I want my minerals developed now, under depressed nat gas pricing, or later, when prices could be double or triple today's price?"  Obviously the lessor has no say in that decision.  However one potential advantage to being a lessor in a proven area with a unit larger than 640 acres might be spreading the royalty stream out over more years and ending up with a higher average price per mcf.  Generally speaking the larger the unit, the longer required to fully develop owing to the limited gathering capacity in the pipeline system.  In other words an operator will not drill more wells than their take away capacity can accommodate. 

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Permalink Reply by Bobi Carr ("parker") on May 24, 2012 at 3:37

I am a large landowner in this area and decided to accept the offer.  A friend who was leased to HK also received a similar offer, except that his existing lease had 25% royalty instead of 22.5%.  I called HK and they were NOT interested in leasing my property.  As a matter of fact, they withdrew their offer to my friend.  He has a large tract of land also.  His property was in a HK Unit, my property is in an ECA unit.  Even though my property is contiguous with a HK Unit, they were not interested.

Encana is also only renewing the leases that are in "their" units.

I have 280 acres.  After weighing all of the information, I renewed my lease.

I have talked to several of the large landowners in the area and they have leased also.  I have also reviewed the Conveyance records at the courthouse.  The Lucky property is leased @ 1000 +/- acres.  The Gray property is leased @ 1,500 +/-.  The Hassell property is leased @ +/- 200 acres.

Most of the remaining property in this area is 3/4 acre lots in Lucky Estates and 1/5 acre lots in Golden Meadows.  Both of which will never have to be concerned with a well site or any other disturbance on their property.

I also have 5 acres on Caplis Sligo Road that I have NEVER been able to lease even though it has been in a producing unit for over a year.  I didn't HOLD OUT and I didn't ask for anything more than what the "going" price was at the time, but I still don't have a lease.   I don't want to waste my time chasing down unauthorized charges for such a small tract of land, but that seems to be my only present choice.

GOOD LUCK with your ultimate decision.  Each and every decision, to lease or not to lease is a personal one.

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Permalink Reply by Skip Peel - Mineral Consultant on May 24, 2012 at 3:43

Good information, Bobi.  Under those circumstances those with modest mineral acres will likely have little leverage with EnCana.  It would appear that they are willing to Force Pool everyone and let those with modest mineral acres who do not wish to lease at their terms become an Unleased Mineral Interest under LA Mineral Code.

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Permalink Reply by Bobi Carr ("parker") on May 24, 2012 at 3:52

What some people fail to realize is that the decisions are fact dependent at a PARTICULAR TIME.

Who wouldn't like to have $30,000 per acre and 30%?  

LEASING PROPERTY IS SORTA LIKE SELLING STOCK.  It might be sky high one day based on present plans of a company and pretty low a month from now when they have found the "NEW" Eagleford Shale.

Make the best deal you can at the time and then MOVE ON.  It's not necessarily that someone else gets more (or less) than you do, they just executed their trade under a different price environment.

GOOD LUCK TO ALL.

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Permalink Reply by Henry on May 24, 2012 at 8:02

Good to hear you are finally going to get drilled, Bobi.  Best of luck for your well(s).

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Permalink Reply by Bobi Carr ("parker") on May 24, 2012 at 9:33

Thanks Henry,

  But not getting drilled.  Just a new lease.  

  With many areas not living up to the hype, I'm just glad that my property is still in the mix.

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Permalink Reply by GoshDarn on May 24, 2012 at 16:13

parker:

It seems that you really invested your time so as to do the required due diligence.

Glad it evolved into a win-win, of sorts.

The future is bright, methinks.

Take care.

GD

 

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Permalink Reply by HBP on May 24, 2012 at 4:42

I'm with you Skip - leave it in the ground at these prices.  But regardless of what Encana (or Shell) is doing today, its no guarantee they will even dust off the drill bit for an HBP unit at $5-7 gas.  Its not a bad thing, we don't want to climb out of a glut just to drill back into it.  But any new Lessors out there should just be aware of the minimum that may occur and still hold their lease, and larger units can highlight that.

My other concern with the larger units, mainly the stacked 1280s is that current drilling technology does not favor drilling 10,000ft lateral portions, and there is not enough data to show these super wells proportionately produce per lateral foot as well as the shorter laterals in a 640.  I'm not an engineer, but I know i gets a lot trickier.  So If a company formed a 1280 out of convenience rather than necessity - I would be skeptical it benefited the owners.  If I was an operator and you told me there was a chance I could hold 100% more acreage, but only had to drill a longer well that was 30% more expensive  - I could make it worth my time to convince the commissioner of a 1280.

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