Replies to This Discussion

Permalink Reply by smithsee on July 26, 2009 at 13:56

I hold around 120 acres, that has never been leased and is in that survey. We have been offered the 2000.00 per acre, with .25 royalty for 5 years. Since I don't know who your company is, (it could be the same), The leasing agent seems to be housed around Center, Texas. Seitel has been a pest for a long period of time, but we decided not to let them do the seimic survey, since our property has never been leased. They continue to call every day though, which indicates to my family that this survey is of great interest to some parties. Any thoughts?

Permalink Reply by Bill R on July 26, 2009 at 15:06

smithsee.... price sounds in the same basic range (we got a hair higher) and agreement about the royalty except it is a three year with two year extension. Did your 'interested' party have the same type of 'non disclosure' clause in their agreement? This lease was for one of our 'other' parcels at 235 acres, closer to Devon's well. It was right after Devon got their permit that the phone calls for everything else we that began...

Permalink Reply by etx44 on July 27, 2009 at 2:23

$ 2000.00 is a lot for investors in gas wells at current prices, so maybe they are after oil in the short term ?

Permalink Reply by ALongview on July 27, 2009 at 2:48

Considering the Pettit results Cabot had you could very well be right.

Permalink Reply by Bill R on July 30, 2009 at 8:51

On a side note.... Devon contacted us and wants to lease additional 117 acres in Quirk A-35 and several areas up in Shelby county. Appears that even with the price of Natural gas being down that the 'feeding frenzy' may be starting up again. I'll update more once I hear more from them on where and what they are after.

Permalink Reply by ogmladvisor on July 30, 2009 at 19:24

feeding frenzy? just wait until the natural gas hedges and rig contracts run out at the end of '09, this area will look like a ghost town (unless natty gas prices increase, which is not expected).

You heard it here first.

Permalink Reply by Bill R on July 30, 2009 at 19:46

Hmmmmm?
From your post, you sound like you believe everything is going to shut down at EOY 09.... but we are being contacted for both new leases and renewals or extensions for our holdings... is this normal when things are shutting down or are they hedging their bets and just going to tie up the land so no one else can grab it up when things loosen up again?
Forgive me, but this is all still new to me and I am trying to figure out what is going on with these properties and mineral rights that I inherited. Basically I am learning that things aren't always what you think they are in the land of Texas when dealing with oil & gas. My dealings with the timber sales on the land were easy... that part I understood.... this O&G thing.... man, this just keeps going 'swoosh' and flies right over my head.
The good news is that I now understand that when you guys are talking a 'spud' that you aren't talking about something that I can top with butter, sour cream and chives....LOL
Hey, all joking aside, I really do appreciate any, and all information that I get from everyone on here... and I send each and every one of you a heartfelt, “thank you”!

Permalink Reply by ALongview on July 31, 2009 at 3:52

Two companies that reported already and are active in that area are Cabot and SWN and they have 2010 hedges that are 30% and 50% of 2009 hedges respectively. Also they would only need to acheive a total average of $5.00 /mcf gas for all of 2010 including hedges to achieve 2009 revenues and this certainly as an average is not out of the question and actually on the low side of estimates. They have actually picked up drilling in the last few months in SA County and Nac county and there is no way to tell right now what they will be drilling/producing either to HBP, or because of better results, or Govt. intervention, or fixed contracts in an inflationary environment or, because of the reasons you state that will decrease production and therefore supply, heck maybe just because the economy is a little better in 2010. Too many variables to make a call that it will be a ghost town in 2010.

Permalink Reply by ogmladvisor on July 31, 2009 at 6:04

I told many of you late last year and early this year that the days of 10k, 15k, and 20k bonuses were long gone...and very few of you believed me, thinking your big payoff was right around the corner. And I have been right on target, with bonuses in SA County averaging between $300 and $1000/acre. I told many of those holding out for gargantuan bonuses that they would be watching from their front porches as wells were drilled right off of their property lines in 2009...and I have been correct, those holdouts are still holding out. And good for them, someday their decision might payoff, I just happen to think it will be a very, very long time from right now. And when I said ghost town, I was only speaking about the drilling phase, companies will never quit buying leases!

And drilling has not "picked up." Just look at the time it takes for a permit to get approved at the RRC...this time last year, permits were taking three or even four weeks due to the backlog...the latest permits are taking one day for approval, go look for yourself. The ony reason you are seeing the level of drilling in this area right now is the rig contract, and those contracts will begin to fall off as more time goes by. Folks, the bottom line is that natural gas prices are terrible right now, and drilling JL and HS wells in the area is simply not economic. Who cares if a HS well IP's at 10 million per day when it's doing 10% of that within a month or two? Take a look at EOG's Gammage well in Nacogdoches County, you will see what I mean. We ALL need prices to go up, and soon, so we can all be happy...and trust me when I say no one wants that more than myself.

Permalink Reply by ALongview on July 31, 2009 at 6:36

I happen to agree with you on many of the bonus situations. I however have never heard more than $6000/acre in San Augustine County even at the height of the "frenzy" last year. I should have been clear that I was talking specifically about San Augustine and Nacogdoches County and Haynesville drilling picking up recently and yes there are more Haynesville depth permits in the last few months than ever before in this area(because prior to 2009 there was maybe one well). SWN, COG, and Common just signed a JOA to drill Haynesville wells on acreage in SA County, SWN just announced a second Haynesville well results and a third and fourth being drilled right now or permitted. COG was pleased with their vertical results in SA County for the Haynesville and had great Pettet results which will keep them drilling as I don't know anyone who thinks oil wells will not be profitable. Samson has permitted numerous Haynesville depth wells on the county line and EOG is developing the same area, Devon and Crimson have permitted a Haynesville in San Augustine and St. Mary has as well. That is a pickup in activity no matter how you look at. Also, a quick permit means that throughout the State there are less wells being permitted. You must remember that oil was $145 last year as well which led to a lot of marginal wells being drilled. A better sign of the interest in the area is the number of leases being made locally and they are still being signed and recorded at a pretty good clip in SA and Nac. Counties considering the current price of gas. They are not being signed for $5-$6k any more and may not be ever again but they are being signed for $500-$2k which isn't too shabby. The leases being signed are in an environment where O&G companies are working with tight capital budgets as well so they must really want a presence in the area for later on (3-5 year leases) when the price of gas picks up. Could you please share with me the results of the Gammage as I have not seen them released as of yet?

Permalink Reply by ALongview on July 31, 2009 at 7:43

Just thought I would add that in a very quick preliminary count of permits there were 42 wells in San Augustine County in the first seven months of 2009 vs. 31 in the first seven of 2008. The total for 2008 in SA was 51. It looks like 2009 may be slightly higher by years end.

Permalink Reply by ogmladvisor on July 31, 2009 at 9:40

A permit filed does not equate to a well drilled. Do you know how many were actually drilled in 2008 and so far in 2009? I certainly don't. In addition, the numbers you throw out are misleading. In 2008, Southwestern and Cabot were basically alone in their drilling programs in SA County, with a few exceptions. Now, you have several other operators tinkering around the area, such as XTO, Devon, Common, Crimson, and EOG. And once more...if these companies didn't have rig contracts forcing them to drill wells, it would be a different ballgame. And you're hopefully right about Pettet oil wells...could be the bailout many companies in this area need. But I am here to tell you, if gas prices do not improve, by year's end you can kiss most of the James and Haynesville drilling goodbye...at least until prices recover. The commodity price, as low as it is, simply cannot sustain drilling these wells. And once again, if there is anyone among us who is wishing for prices to increase, it is me. This business is my livelyhood, and based on what I see and hear, I am not very comfortable with what the future may hold.

And I never said leasing efforts would slow down...companies have to invest in the future and hope that prices come up. I have only said lease bonuses would not get out of hand, and they have not.

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