Replies to This Discussion

Permalink Reply by obed w odom on June 28, 2012 at 4:44

Wow! This is quite an increase in activity, and Cabot already has an adjacent drilling unit in SEC 18/19 T22N R1W.

Permalink Reply by Skip Peel - Mineral Consultant on June 28, 2012 at 4:46

Paul, what you've got there is a pre-conference notice letter for a Cabot unit application.  If you can scan and upload the letter and plat we'd appreciate it.  Please note that the offer of a meeting on July 18 is just that.  In other words if no one on the Interested Party list who receives this letter requests that meeting, it will not be held.  After the meeting, if one is held, or after the request period has ended, the unit application will move to the Commissioner's public hearing schedule for a date in August.   It's good to have evidence that Cabot is still in the Brown Dense game.  And their unit application helps to confirm the area that appears to be most prospective at this time.  Good Luck.

Permalink Reply by G Meaux on June 28, 2012 at 9:35

 Notice Letter

Attachments:

• SKMBT_C55212092214170.pdf, 1.2 MB

Permalink Reply by Skip Peel - Mineral Consultant on June 28, 2012 at 10:05

Thanks, GWM.  It's a good sign that a company other than SWN has an interest in the Brown Dense.  Now it they can just drill and complete some commercial wells, we may have us a Play.

Permalink Reply by Flying High on June 29, 2012 at 4:02

Skip, Please explain the rationale behind Unitizing three contiguous 1280 acre blocks of land when no true proof of the play is known.  Also, do you think the plans are for Cabot and SWN to combine efforts since each of them own leases in each of these Sections?  Or is it commonplace for one company to sell their leases to another so as to benefit by simply sharing information on the wells that are drilled while trying to prove the play?                I do know that a number of wells have been drilled surronunding these Sections in the past 40 years, so in your mind, is there possibly some rhyme and reason to the Unitization of the Blocks so close together???

Permalink Reply by Skip Peel - Mineral Consultant on June 29, 2012 at 9:37

Let's start with why a company wishes to apply for a unit designation.  An approved unit guarantees the applicant the right to be the operator (companies such as Cabot and SWN are in business to drill and operate wells, not to buy leases and participate in someone else's unit although that does happen).  The unit order also gives the applicant the right to Force Pool all mineral interests within the unit boundaries (although unleased mineral owners tend to dislike force pooling the statute is more about forcing cooperation between companies holding lease rights to cooperate in order to facilitate development).  A unit order allows for full development meaning the right to drill the max number of wells allowed by spacing regulations.  A unit doesn't cost much to acquire and gives certain benefits however the unit order does not require the drilling of any wells nor a time frame for drilling of wells (there is no minimum acres under lease requirement for the unit boundary).  A unit order is good indefinitely until an application is made to dissolve it.  A unit does not hold leases in force therefore the term of the leases contained in a unit are a determining factor on when and if a unit well will be drilled.  An operator with a unit order must still apply for well permits.  Interested parties in the unit are noticed for the unit application and for any alternate unit well locations but not for well permits.

SWN and Cabot could certainly swap leases and have cooperative endeavor agreements to share science.  In the early stages of a play an energy company may not mind so much holding leases in another's drilling unit because as a Working Interest they would have access to the science:  cores, logs, etc.  The wells in the past likely have no relevance.  The reason for the units being so close together is that both companies seemed to have found the combination of attributes they have been looking for in the BD.

Permalink Reply by Flying High on June 29, 2012 at 10:42

1)  So am I correct in this assumption:  If two companies have properties leased in the same unit, either of them can drill and operate a well on lands they have leased as long as they pay the landowners and other leasing companies in that section accordingly by the terms of the leases in force in that unit???

2)  If the companies believe they have found the combination of attributes they have been looking for in the BD, does that lead to the fact they are more apt to drill and attempt to produce quickly in order to produce income necessary to allow them to cash flow and further develop?

Permalink Reply by Skip Peel - Mineral Consultant on June 29, 2012 at 11:02

When a company receives a unit order from the state, they have the right to designate the operator.  Companies whose business model is to operate will designate themselves as the operator of the unit.  Keep in mind that the unit order is for a specific depth range/formation/zone.  If we are talking a Lower Smackover unit, only the unit operator may drill those wells within that unit boundary.  An operator of a unit will honor the lease terms for any Working Interests in those wells.  So lessors will have their lease terms honored regardless of what company they leased to or which company ends up as unit operator.

The actions of Cabot and SWN would tend to indicate a high level of interest in the area of the Ora Field, Union Parish.  If they can drill and complete commercial wells there, they will take what they have learned and attempt to "step out" meaning to expand the producing area by drilling more wells moving outward from the initial successful wells.  Once they have a successful unit well drilled they are more likely to go the step out route than to just keep drilling more wells in the same unit unless it is for the purposes of science meaning to try different drilling and completion designs in order to learn more about the formation.  Energy companies set aside capital to develop new prospects and usually don't depend on intensive drilling in the initial area to provide cash flow for further development.  Even with successful wells there is much remaining to be done.  The infrastructure to support expanding production will take time to build.

Permalink Reply by Skip Peel - Mineral Consultant on July 24, 2012 at 11:59

Cabot Oil & Gas Operations, July 24 press release (excerpt):

Other Activity
Cabot's initial Utica test in Northwest Pennsylvania, operated by Range Resources, is drilling ahead at this time; the Company's initial Pearsall well in the Buckhorn area is also drilling ahead, with a second rig commencing in the Pearsall in August. In regard to the Brown Dense, Cabot will continue to watch for industry data points prior to allocating additional capital to the play.

Link to full article: 

http://www.finanznachrichten.de/nachrichten-2012-07/24130303-cabot-...

Permalink Reply by Matthew Kable on July 26, 2012 at 6:06

Some additional comments regarding Cabot's LSBD well from their Q2 2012 Earnings Call... Operator And our next question comes from Bob Brackett of Bernstein. Bob Brackett - Sanford C. Bernstein & Co., LLC., Research Division Can you talk about what you learned from the Brown Dense well, and what it cost you to learn that? Dan O. Dinges The cost was the acreage cost of the 13,000-plus acres and the cost of the drilling, which we wrote-off as our dry hole cost, which was around $10 million. And right now, we're still, again, have learned that it's productive, continued capital being spent in the area by different operators and making an effort to determine how to make it economic up there and compete with the other plays that companies have to allocate capital on. So we're not -- again, because we write-off the well, we're not saying we're condemning the play. Bob Brackett - Sanford C. Bernstein & Co., LLC., Research Division And do you think the poor results, I guess, implied in the write-off-- are they the result of a completion, or do you think it's the geology or some combination? Dan O. Dinges Well, I think it's just the early stage of going into a virgin area to drill well when you have decisions on where you're going to place the well in the zone and what type of fracs you're going to place on it, how you're going to space those fracs and the well we drill, exploratory, again, in nature. We only had 10 stages applied to that. And it's gathering information that's going on not only in the Brown Dense, continuing gathering information in the Tuscaloosa Marine Shale. We did the same thing as we gathered information in every other play, the Eagle Ford, we're doing that now, in the Purcell. We did that in the Marcellus, and it's just a very early entry. Some play, some areas, the key to success is very obvious and upfront. In other plays, the key to success takes a whole lot more study and evaluation and technology to get there.

Permalink Reply by Matthew Kable on July 26, 2012 at 6:49

Here's the Link to the full Cabot Earnings Conference Call Transcript: http://seekingalpha.com/article/749791-cabot-oil-gas-management-dis...

Permalink Reply by tony allen on August 3, 2012 at 12:03

Skip, do you think the BML results will encourage Cabot to return to the play?

• ‹ Previous
• 1
• 2
• Next ›
• Page