Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on December 16, 2012 at 12:11

In the early days of the Haynesville Shale Play Empresa formed nine drilling and production units in the Jamestown and Woodardville fields.  I suspect that they held the leases on a good bit of acreage in those sections.  They probably formed the units as part of a strategy to attract a capable operator and then participate as a Working Interest.  Chesapeake ended up drilling wells in some of those sections but others were un-drilled as they were found to be outside the economic limits of the play.  I think Empresa has a similar situation here and, considering the slow pace of exploration by SWN and others, is concerned about lease expirations.  I don't think they will drill.  I hope not as I think it likely they would drill vertical "test" wells in an attempt to hold onto their leases.  I think they are fishing for a small but capable horizontal operator to prove up their acreage.

Permalink Reply by tony allen on December 16, 2012 at 12:38

Thanks Skip.Once a drilling unit is established does it remains enforce indefinetly? And if Empressa does not find a partner to drill,will they have to re-lease from the owners if leases expire before the initial drilling? It seems Empressa has the upper hand after establishing the unit. I would think it would be hard for the owners to lease to another operator when they know Empressa controls the unit.It does not seem likely there would be a lot of " capable operators"  interested after SWN, EOG,Devon,Exxon and Cabot have all failed. Would a couple of veticals HBP the whole drilling unit or does it require a horizontal? Sorry about all the questions.

Permalink Reply by Skip Peel - Mineral Consultant on December 16, 2012 at 12:53

Units don't hold leases. Only drilling producing wells or exercising lease extensions maintain development rights past the primary term of a lease.  Units are in force indefinitely until dissolved by order of the state. It is relatively common to see a capable operator wait out a company like Empresa and then obtain their own leases and file their own application with the state for the same unit.  Forming a unit is a way to maintain all the leases within a unit boundary with a single well including a vertical.  The unit application definitely contemplates horizontal development.  The state might refuse Empresa a permit for a vertical well.

Permalink Reply by tony allen on December 16, 2012 at 12:59

Thanks Skip.

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