Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on October 9, 2013 at 15:34

Unleased Mineral Interests (UMI) in Louisiana receive their proportional share of production (not royalty as royalty is derived from a lease) after a well has recovered it's cost.  The UMI's proportional share is subject to certain continuing lease operating costs but is 100%.  This is unique to Louisiana as other states generally include a risk penalty  beyond 100% recovery of cost.  With risk penalties of 300% or greater average wells rarely produce enough to pay UMIs.  In the Haynesville Shale many wells never recovered 100% of their cost due to depressed natural gas prices and high well costs.

Permalink Reply by Steve on October 9, 2013 at 15:37

That does not apply to landowners in either State who have leased their land to the operator. Leased mineral owners get royalties from the 1st barrel subject to any cost deductions in the lease agreement.  Penalties like the one you mentioned only apply to those who opt out of signing a lease. That is my understanding. Maybe someone knows better.

Permalink Reply by Skip Peel - Mineral Consultant on October 9, 2013 at 15:41

Risk penalties do not apply to lessors.  Royalties are paid from the first barrel or mcf produced.  Royalties are paid whether a well recovers it's cost or not.

Permalink Reply by madison Baily on October 10, 2013 at 0:53

I talked to Goodrich man, and he said that he was looking for land near McComb, Ms. to store pipe.

Permalink Reply by tc on November 6, 2013 at 3:56

Regarding leases in MS, on Goodrich's conference call they said they may look into swapping leases with EnCana so that they don't have small WI in each others wells.  More of an FYI for landowners who may get communications from an operator other than who they originally leased to.

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

And as it relates to acreage position, I know there's quite a bit of overlap with you and Encana, it's starting to get to the point like in other plays, Wattenberg or Utica, where guys have swapped acreage around. As we look forward through 2014, is that a plan of yours to consolidate more acreage in yours and do some swaps with Encana and other operators in the area and really kind of core up your position. Or is it too early for that, in your opinion?

Walter G. Goodrich -  Non-Independent Executive Vice Chairman, Chief Executive Officer, Member of Executive Committee, Member of Hedging Committee and Member of Nominating & Corporate Governance Committee

Well, good question, Ron. In fact, very encouraging when you look at the Encana slides this morning and you look at their map in particular, you'll see very similar footprints to ours. And in particular, in the Mississippi core position. So -- which is basically why we've had a non-operated interest in some of their wells and they've had a non-operated interest in some of our wells. What we would like to do, and we think they may be receptive to this and that we've had some conversations, is to swap some acreage so that we can consolidate interest in our block, in our units, and frankly, it would wind up being basically kind of a checkerboard look because our footprints are very similar. But we think that makes a lot of sense and the initial response from Encana was that, that made some sense to them. So we're going to be getting with them in trying to do that swipe-like acreage and that makes some sense to us.

Brian M. Corales - Howard Weil Incorporated, Research Division

Right. And then, I mean, obviously, Encana had the discussion today with the TMS, have you all talked to them in terms of -- I know you have some allocation for non-op -- for some non-op wells, and I know you're still trying to swap acreage. I mean, with the increase in rig count they're having, could you have more than maybe you originally thought from Encana-operated?

Walter G. Goodrich -  Non-Independent Executive Vice Chairman, Chief Executive Officer, Member of Executive Committee, Member of Hedging Committee and Member of Nominating & Corporate Governance Committee

That's potential, Brian. But as Rob said, we are in discussion with them about some sort of -- I don't know that it would be a global swap of acreage, but a swap of acreage where we both try to get away from having fairly small non-operated working interest in the other's wells. So we think that probably makes sense given our planned level of activities in there, we'll likely come up with some agreement. It may be on a well-by-well basis. In addition, I think, it's important to note that we've got a global joint operating agreement in place with Encana that covers all of our joint acreage out here. So to the extent one party for whatever reason might want to or not want to participate in any given well that 1 or 2 parties is proposing, we would have the opportunity to do that, both under the consent and nonconsent provisions of those operating agreements.

Permalink Reply by Skip Peel - Mineral Consultant on November 17, 2013 at 3:56

As of Friday's rig report the Huff 18-7H #1  is 79 days drilling ahead at 16,432'.  The rig continues to be listed as assigned for the CMR 8-5H #1.

Permalink Reply by Steve on November 17, 2013 at 5:32

Hummmm ...  is all I can think at this point.

Permalink Reply by Greg Moser on November 18, 2013 at 5:49

What does this mean?  I thought they were finished drilling over a week ago.

Permalink Reply by Skip Peel - Mineral Consultant on November 18, 2013 at 6:01

It means that as of Friday the rig was still drilling the Huff.  I'm not sure of the permitted  Measured Depth (MD) but I would think that barring any mechanical problems beyond this report the well should be nearing or has reached Total Depth (TD) by today.  Then the rig would have to set the final casing string.  We won't know for sure that drilling ops are finished on the HUFF until we see the rig reported as rigging up or drilling on the CMR on next Friday's report.

Permalink Reply by RGV AG on November 18, 2013 at 6:04

I believe the MSOGB meets today if I am not mistaken.  I wonder if anyone on the boards is going.  Usually the Woodville Republican publishes some kind of a report. 

Permalink Reply by Charles Bell on November 19, 2013 at 1:33

Ike

MSOGB meets on Wed, 20th. I will be there. Are you in CMR 8-5H #1?

CB

Permalink Reply by Bernell McGehee on November 18, 2013 at 13:49

Word I got late this afternoon is the process of moving the rig from the Huff to the CMR 8-5 has begun.

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