Replies to This Discussion

Permalink Reply by jr on January 29, 2009 at 16:57

i was told today that some property was leased off hwy 177 north of pleasant hill, la for $7500/ acre.

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Permalink Reply by getoverit on January 30, 2009 at 3:55

JR,
Do you know who made the offer and how many acres? We have 44 acres in DeSoto Parish in Red River-Bull Bayou Field that is currently unleased.

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Permalink Reply by chattykb on January 29, 2009 at 18:57

What about leases in Columbia Co., Ark.? I was offered a sorry of a deal from Hunter Energy out of Ruston. Five years, 1/8 RI, 1/16 OR and $150 per net acre. Ouch!

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Permalink Reply by chattykb on January 29, 2009 at 19:43

I don't intend to. I don't like the 1/16 OR. I want 1/4 RI and 3 years. Hunter did say it was for a group in Shreveport I think. He wouldn't tell me who. Personally I don't get a very good vibe from this guy.

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Permalink Reply by chattykb on January 29, 2009 at 20:05

I really don't know. From what I gather, things aren't booming up there and no word of great prospects, so I'd take the $150 bonus unless I hear otherwise. I'm more concern about the 1/4 RI and 3 yrs than anything else.

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Permalink Reply by chattykb on January 29, 2009 at 20:16

I just wish I had some info on things there so I could put the ball in my court for countering.

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Permalink Reply by chattykb on January 29, 2009 at 20:21

Thanks!

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Permalink Reply by Dan on January 29, 2009 at 22:16

I stopped buying in the HS play in November, and my client is trying to sell his leases and expecting a loss. We were buying in Harrison County, Texas, and staying well away from the 20K per acre stupidity (we were certain from the beginning when we saw the bonuses going in that direction that the pricing was completely irrational and about to collapse, but none of us liked how right we ended up being). At current prices and price expectations drilling a non conventional shale well is non-economic. Most companies estimate the break at 6 dollar gas and right now henry hub is under 5 dollars. Particularly in the parts of the play where the shale is 10K to 12K feet deep. Anyone drilling into such areas under the current economic client is taking a gamble that goes directly against the majority of price predictions currently available, and I personally think even the $7 predictions for the rest of 2009 are extremely rosy. Keep in mind that we had an extremely cold January that should have driven prices up, and yet they dipped below $5, at the time of year when gas prices historically peak. I am seriously pondering that the ORRI I earned while in your neck of the woods may be worthless, and have left the business entirely to practice law in preperation of the litigation boom that is about to erupt between E&P companies. If you get leased in the current climate, you are lucky, and if you get leased at a 25% royalty you better hope that gas prices sky rocket, otherwise you will probably be drilled last. Under Texas Law I think it would be easy to argue that a reasonably prudent operator would be hestitant to drill on land leased at 1/5th, even in areas where the shale is comparably shallow.

Edited to point out that if you do get a first well it is pretty much gauranteed you won't be "held for 20 years until the next well is drilled." You may never be infilled at all, but if you are it will likely be within about 5 years, since that is the aproximate time it will probably take the first well to pressure depelete.

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Permalink Reply by Muddigger on January 30, 2009 at 4:36

These worthless leases that you speak of selling, Are they on Ebay? I'm very interested in worthless leases. P.S. If bublegum is $2, it is highly unlikely NG will stay below $5

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Permalink Reply by The_Baron on January 30, 2009 at 5:21

Prices will probally stay low for some time. With the economy in the toilet industrial use and power generation are not creating the demand needed to boost prices.

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Permalink Reply by Dorcheated A1 on January 30, 2009 at 5:33

This is true Baron, but like most anything it will go up. It could be five years or 10 years from now, but it will go up. Think of it as gold, it has value and the value will increase with time. I'm in no hurry, unlike most O&G companies, I'm not on a three yeard deadline to get something done.

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Permalink Reply by Muddigger on January 30, 2009 at 6:04

I very seriously doubt that prices will stay low, All these rigs that are being stacked that drilled a vertical well every 17 days and these wells came back at 1000 MCFD a day for about a month and then fell off to nearly nothing. There is a reason that they constantly drill wells. Its called depletion. Simply put, Supply and demand. Two months from now, check production reports. Production will not be 1/3 of what it is today. Drilling a HS well every 90 to 120 days will slow vertical wells return, but only until gas storage is depleted and they are burning gas off in these storage fields at night when you sleep. Getting rid of $5 gas, making room for some $15 gas.

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