Replies to This Discussion

Permalink Reply by Land Rat on February 4, 2014 at 17:00

1383-A

And it doesn't say that it was specifically approved for horizontal development...it says:

IF a horizontal well is drilled,

THEN spacing shall be calculated based on the point at which said well is perforated. 

It doesn't require that a horizontal well be drilled, but it does contemplate the possibility.  I don't think SWN ever promised to the commish that it would drill a horizontal, just that it is in the cards for this play eventually.

In any case, I'm sure we'll see horizontal development in this and other L SMK units...and SWN isn't saving any money by holding these leases and drilling $10 million dollar vertical wells...who knows if these leases are even in need of holding for a few years anyway.

It's past this old dog's bed time.

Permalink Reply by Skip Peel - Mineral Consultant on February 4, 2014 at 17:06

Section 5 is the standard boiler plate used in all applications filed for units set up for horizontal wells.  Not just SWN and BD.  All operators drilling horizontal wells in the state.  Haynesville, TMS, CV etc.  It is the argument/reason for requesting approval of large units that cannot be drained by a single well.

Permalink Reply by Land Rat on February 4, 2014 at 17:13

I think the commissioner is just giving them some time to experiment and they want to avoid the accounting nightmares of X unit laterals when the laterals eventually do come.  that's what an attorney I work with down there told me. 

Permalink Reply by Ben Barnhill on February 5, 2014 at 6:34

Skip, I uploaded the 3 pages of the letter received from the Arata law firm on Saturday. Hopefully these will be readable to all.

Attachments:

• SWN Jan DU Letter.jpeg, 354 KB
• SWN Jan DU Plat.jpeg, 3.9 MB
• SWN Jan DU Letter P2.jpeg, 332 KB

Permalink Reply by Skip Peel - Mineral Consultant on February 5, 2014 at 6:58

Very readable, Ben.  Thank you.

Permalink Reply by Skip Peel - Mineral Consultant on February 4, 2014 at 17:19

That may be an accurate assessment however drilling verticals from surface locations such as the Milstead 15 screws up the usual symmetrical layout of the horizontal alternate unit well laterals required to fully produce the entire unit acreage.

Permalink Reply by Land Rat on February 5, 2014 at 1:27

I think it's a little early to say what the usual symmetrical layout for horizontal development in the Brown Dense is.  Or that symmetry is best practice for spacing anyway.

The only thing remotely similar (being a generally liquids-heavy resource play) in Louisiana at the moment is the TMS and there is not enough large-scale development to reveal any "usual' layout.  These verticals will be great monitor wells when the horizontal development does come.

Permalink Reply by Skip Peel - Mineral Consultant on February 5, 2014 at 2:16

The symmetry is or will be very close to the spacing/well set backs and lateral axis currently employed by SWN.  They already have sufficient science regarding the natural fracture patterns.  Unless operators start applying for geologic units (like S LA) instead of geographic units you won't see any substantive change.   Monitor wells are fine for the industry, not so much from the perspective of the mineral owner/lessor.  It simply represents some unit rock that didn't get stimulated/produced in the most efficient manner.

Permalink Reply by Land Rat on February 5, 2014 at 2:40

A geophysicist has indicated that well spacing will probably be similar to that employed in the eagleford should large-scale development get started.  I'll just agree to wait and see what develops. 

The overarching fact is that without this preliminary vertical development, the horizontals wouldn't get drilled. Ever at any spacing interval.  If SWN wanted to simply hold this acreage it could do so by paying ~$500/ac x 1280 acres = $640,000 per unit...far less than the cost of these wells.  I lot of rock remains unstimulated during completion and I don't think any of these mineral owners are going to be any worse for wear.

Permalink Reply by Skip Peel - Mineral Consultant on February 5, 2014 at 2:50

SWN could drill pilot holes on their early phase horizontal wells.  And they could case and space them for later horizontal recompletions.  Both would be in line with their unit applications for 1280s.  The company has a lot of acreage with little to no well control.  They could simply exercise extension options but then that would be shooting in the dark without creating any science to guide exploration going forward  They need to drill a lot of wells and do so in a constrained time frame.  The clock is ticking on a lot of leased acres.

Permalink Reply by farrjt on February 5, 2014 at 11:43

If a vertical well is drilled, is the landowner only one to receive royalties or is it by section or pool?

Permalink Reply by Skip Peel - Mineral Consultant on February 5, 2014 at 11:59

Depends on whether the well is drilled as a unit well or a lease well.  If a unit well, all mineral interests in the unit share proportionally in production regardless of where the well is drilled.  Depending on the formation produced the unit could be 40 acres, 80, 160, 320, 640, 1280 etc.  If a lease well, only those leases covered by the well spacing would receive royalties, could be one or more.  Specifically as to these 1280 acre L SMK units, all mineral owners within the boundaries of the unit share in production.  The surface location doesn't matter.  And it doesn't matter if the well is vertical or horizontal.

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