Replies to This Discussion

Permalink Reply by chattykb on November 23, 2008 at 20:46

http://www.aogc.state.ar.us/ I still don't understand it either, but there are manuals on the Arkansas Oil and Gas Commission site that touch on it. See on the left column of the site:
Ark Leasing Manual. If searched, you could probably find one that explains Lousisana's laws.
Good luck1

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Permalink Reply by Duncan McGehee on November 23, 2008 at 22:26

Unitization is what the Oil Company tells the State's Governing Board the area it can effectively produce from one well. The Oil Company draws out a map showing what acreage the subject well can effectively drain. The boundaries are set by the State's Governing Board. Different States have different parameters. Alabama, Missippi and North Louisian are Sectional States. Said States are straight Sectional (re: unitization) as is their title (L&E S LA).

Louisiana sets up their units geologically (in the south) - the unit could be kidney shaped like some but not all swimming pools. Trend plays may be a bit different. The Austin Chalk; in Louisiana, was set up on Sections. Looks like the Haynesville play could go that way.

For landmen; unitization can be tough to grok (being congruent with) and harder to explain unless you do it a lot.

Pooling and unitization are two parts of the same animal - like the front and back legs of a dog or two dogs:^). Pooling allows multiple leases to be lumped together to form a more perfect union - the dog or at least "his legs" produce the most beneficial effect for the animal - King Oil. Boundaries are then decided. The area believed to be what a particular well can drain will be defined by the State's Governing Body and a plat will show a survey of that particular unit with a specific designation, e. g. Sparta A SU A. The plat is based on surface acreage.

If you have a small tract, not consent is not as good as an AFE, imo. If your acreage is considerable in relation to unit size; you better have the money or else lease. Non consent is no win, although Texas is way mo betta than other States. Louisiana - so so, but on a level with Texas; I THINK.

This is not my purvue - only my opinion. I'm not often right, but I've never been wrong.

Understand this is very equitably figured and then the fine tuners factor in their scenarios.

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Permalink Reply by shelby on November 24, 2008 at 3:42

Duncan,
Since you are always right and seldom wrong, please elaborate on the concept of "non-consent is a no win". Also your comments on "you better have the money or else lease" ; should one assume that if you can't pony up when the bill comes due, you don't get paid any production revenues?
Any comments greatly appreciated as I am neither an accountant or attorney, just a good ole Southern Boy.
Thanks,
Shelby

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Permalink Reply by The_Baron on November 24, 2008 at 4:09

If you go non-consent as a unleased mineral owner, costs (drilling and operating) will be subtracted from your royalties. You receive no money untill your account is in the black.

Considering the huge costs in drilling and completing it may take a while to get into the black.

You can consent and join as a working intrest owner. The situation is simalar, but you need the capital to pay the bills as they come in. In this senerio, you are protected by the same agreements as the other working interest owners.

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Permalink Reply by shelby on November 24, 2008 at 4:26

The Baron,
Would that take alot of cash under the mattress to handle a !0% unit interest; sounds like non-consent position would be best for those in a position whom have not obtained the status of "millionaire".
Thanks,
Shelby

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Permalink Reply by The_Baron on November 24, 2008 at 4:47

Yes, Whats 10% of 8 million?

Answer: a lot of money! ($800,000)

Thats just what the majors say it takes to drill and complete a well. That does not count the monthly operating expenses.

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Permalink Reply by The_Baron on November 24, 2008 at 5:25

KB, you might need to take your own advice and get an experianced oil and gas attourney.

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Permalink Reply by shelby on November 24, 2008 at 5:15

The Baron,
That's $800,000 per well, right? And so, if there are 8-12 wells per section, is that 8-12 x $800,000 coming at me over time? I need friends like KB, and better get on the phone.
Shelby

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Permalink Reply by The_Baron on November 24, 2008 at 5:24

Petrohawk says 7 wells drilled north to south per section. However, thats still 15 million.

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Permalink Reply by BirdDawg, plain ole' idiot on November 24, 2008 at 15:02

Are you of age to be consentual?
All this consenting is making me nervous.
I think I'll consent to be nonconsent.
And if they sue me, I will plead insanity and then call KB.
Hey KB, saw your response. In that case I will then be McPissed.

Permalink Reply by Snake Stewart on November 24, 2008 at 5:16

Hey Shelby,
One thing that must be considered in this downturn of leasing amounts is ......What will you miss ? The bonus offers that are being thrown around now arent going to make a big impact on ordinary average sized tract owners.But the idea of ownership in a Haynesville Shale well is far more attractive from a profit standpoint in regards to no bonus (or minimal bonus)

This has turned into a catch 22 for the O&G's. They built up the play for the investors while paying big bonuses to some and now want to downplay the bonus size and concentrate on the prospects of big royalties. Now that bonuses are in the tank, why not go unleased and collect 100% of your proceeds minus expenses. Compared to a $1500 bonus buyout for 75% of your royalties makes absolutely no sense whatsoever (on this play).
Lease hounds make zero on unleased mineral owners.Other then that day rate that had so many chopping off their neighbors heads 8 months ago. Without trying to sound too ugly, you have to look at it from that standpoint when you are dealing in this play.For the most part, O&G advice will lean O&G.Thats just human nature.Its what they do.
You just have to weigh all of the intel and glean what is unadulturated. There are many O&G people on this site that have been good for this site. But at the end of the day, they are still O&G and are here to get your minerals for the least amount as they can.Its not personal but neither is my distrust of the industry and their advocates.
Have a good one.
Snake

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Permalink Reply by The_Baron on November 24, 2008 at 5:27

Snake,

If too many hold out and go non-consent. The well will not make enough for the operator.

The well will not get drilled. and nobody wins.

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