Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on May 29, 2018 at 10:48

Okay, Chesapeake lessors, you interested in getting a new operator?  Weigh in.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on May 29, 2018 at 12:59

Wishing is free...and abstract.  Those who have long been "out of the frying pan and in the fire" with CHK could well be willing to roll the dice.  I guess if we conclude that no operating company other than CHK is capable of innovating Haynesville well designs, it may be reasonable to put up with the total disdain that CHK has for their mineral lessors.  I respect the CHK field professionals.  I'm  just convinced that corporate will not hesitate to disadvantage mineral owners to pad their bottom line.

Permalink Reply by Bradley McWilliams on May 29, 2018 at 13:39

I've got a bit of a different angle on it, but I know for the impending sale here, and as a vendor as opposed to mineral owner, I have wished for a utility to buy the production.  Maybe one that knows that this area could provide what they need with a certain amount of drilling to cover production loss.  They would be selling it retail, and would pretty much have a locked in market.  Maybe that's pretty far fetched, but we are wishing...

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on May 29, 2018 at 13:54

A utility, such as NextEra/Florida Power and Light, would be looking to control their future price of natural gas by owning the supplies: see their JV with Comstock Resources in LA and TX.  Tellurian has made this a feature of their integrated business model.  Tellurian will attempt to own the reserves by way of acquiring operated interests in natural gas basins: see their Haynesville acquisition of Samson Louisiana units.  They will also build and own the gathering, treating and transportation facilities that supply the pipelines that transport gas to their LNG facility.  Tellurian is touting the fact that owning the reserves and associated facilities will provide them with a captive supply that will allow them to have a lower cost of supply than competitors that must source their natural gas from the open market.  Tellurian is projecting their cost of an mcf delivered to their cryogenic facility will be $2.25.  What will stop Tellurian from paying the lessors in their operated drilling and production units an arbitrary price not associated with hub prices?

• ▶ Reply

Permalink Reply by Steve P on May 30, 2018 at 5:59

this is clearly one of those "the devil you know..." situations.  CHK seems to now have a magic touch on designing and completing HA wells.  That's good.  They are scoundrels when it comes to fairly paying royalties to mineral/landowners.  We have no say in how it plays out.  

The point Skip raises about Tellurian is another huge concern.  I think, even in Louisiana, a judge would be hard-pressed to uphold royalty payments based upon an "insider" sale that is substantially below fair market value.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on May 30, 2018 at 6:12

Tellurian has been very out front about how they plan to secure natural gas at $2.25/mcf, total cost delivered to the cryo plants.  I have yet to see any media coverage on how this would be accomplished even though it is basically the lynch pin of their business plan.  I'd like to see a legal argument regarding how this would be accomplished.  And if I was a mineral lessor in one of the Tellurian-operated units, I would be concerned now. 

• ▶ Reply

Permalink Reply by olddog573 on May 30, 2018 at 8:46

So as someone who is leased with TELLURIAN tell me what I would accomplish/gain if I were to concern myself with this now?  I was with Chesapeake and they regularly paid less than Samson. I was concerned about that but could do nothing. Samson and CHK didn’t maintain my well pads or equipment. TELLURIAN has come in and is making everything look decent. They have even worked on a well that had a hole in the tubing and the flow rate is up. I’ve talked to several TELLURIAN reps all the way up to a VP and so far have been pleased with what I’ve seen and  heard. . Time will tell if I stay that way but I’m not gonna lose sleep till then. But even then I can’t pay to drill a 10 million dollar well so .....

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on May 30, 2018 at 9:59

You can talk to a savvy O&G attorney and ask if you have recourse in the future if Tellurian starts paying below market. Initial consultations are typically no charge.  A top notch firm might consider a class action for all Tellurian mineral lessors so affected.  You certainly don't have to run out and do it tomorrow but it would be wise to do it before Tellurian starts taking the gas for its LNG operations.  How's your lease terms?  Got a no cost royalty clause?  There may be ways to avoid litigation and protect your rights to fair market pricing.  Of course if your interest is small, you might not notice or care that you are getting cheated.

It is good to hear that the Tellurian field personnel are doing a good job for you.  I don't think they will have any say in how you are treated in the future regarding sales price.

• ▶ Reply

Permalink Reply by Charles Jenkins on June 15, 2018 at 0:29

I am concerned now for I am told that Tellurian is soon to proceed in the Red River Bull Bayou Field and secondly in the Red River Bull Bayou and Chemard Lake Fields in DeSoto, Red River and Chemard Lake Fields.  

• ▶ Reply

Permalink Reply by Charles Jenkins on June 15, 2018 at 0:56

The last phrase was supposed to end "Natchitoches Parish"

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on June 15, 2018 at 1:47

Charles, I'm unsure what you mean by "proceed".  Tellurian is already operating the old Samson wells.  They have not yet announced plans to drill any wells and I don't expect them to since they do not need natural gas for their LNG plant for a number of years.  I think they would drill a well or wells if the production in those units declined to the point of potentially losing the leases but otherwise, they will just sit on them.

What Tellurian would like to do is acquire additional LA HA producing units like those acquired from Samson.  I don't expect that we will see any sizeable acquisitions as most current operators will want cash and Tellurian wants to trade an equity interest in their LNG export facility and supporting infrastructure.

• ▶ Reply

Permalink Reply by Houston Banker on May 30, 2018 at 6:19

They are selling Utica. I’ve heard they’re already in talks with a buyer.

• ▶ Reply

• ‹ Previous
• 1
• 2
• 3
• Next ›
• Page