Replies to This Discussion

Permalink Reply by P.G. on August 15, 2008 at 17:08

Something just doesn't seem right! If someone owned 64 acres or 10% of a 640 acre unit and wasn't leased, I find it hard to believe that they would get 10% of the production money, after expenses. That would mean the drillers made nothing off of that 10% of the unit. Unless they somehow call their profits expenses!
I find it hard to believe they only are making their profits from those who have leases.
If an unleased land owner is partners with the drillers, why wouldn't the money be split equally? That would only leave the land owner with half of what they would be expecting, wouldn't it?

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Permalink Reply by reg on August 15, 2008 at 17:27

Once again, the mineral owner owns the gas and once unitized, their rights are protected. That is why they are paying so much to lease. If they don't lease you, then you are their partner. It would actually be better for them to not lease if these were speculative well sites. They would save (64 acres x 25000 bonus) 1.6 million by not leasing that owner.

But since these are not speculative wells, they are willing to lease at high bonuses and high royalties. Because the payout happens quickly.

These wells produce on the low end 5000 mcf per day if drilled, perfed, and fracted correctly. And I mean perforated and fracted at least 5-8 times in the shale. If this is done correctly, then the horizontal well can produce 15-20 million cf per day and not loose significant pressure. These wells only loose about 9% pressure the first year.

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Permalink Reply by P.G. on August 15, 2008 at 17:36

Well if you are their "Partner", wouldn't you both share in the production after expenses? The math somehow isn't figuring that is it? What driller would come out and drill you a well and give you all the money after the expenses were paid? I don't mean to be a bubble buster but that math can't be accurate! No body in their right mind would lease if they could get it all after expenses! Especially with the way the production has been going with those wells!

Any landmen on here care to explain what I'm missing here?

Permalink Reply by jim neely on August 16, 2008 at 4:49

where did you get the 9% / yr ?

Permalink Reply by Grillin' - MmmMmm on August 20, 2008 at 9:17

Reg, the only potential flaw I see in your logic is that these wells come on at high flow rates but drop off very very quickly. Generally in the Barnett, you will see a 70% decline in the first year. So a well that comes on at 5000 mcf/day on Day one will be at 1500 mcf/day by the end of the first year. The decline is hyperbolic and levels out at rates like 200-300 mcf/day but stays there for many years.

Permalink Reply by The_Baron on August 15, 2008 at 14:52

Don't forget they will pass on leasing and operating costs as well. Not to mention not all wells are "monster wells".

Chesapeakes latest hansville completion is making about 5milion feet a day, this is great, but it should fall off quickly.

Should the well blow out or even have a prolem down hole, the non consenting owner might wish they leased instead

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Permalink Reply by reg on August 16, 2008 at 7:40

the wells are not running at full capacity. the stated reason is that pipelines are being brought in. But once I get some feedback on how the chokes on the wells influence production, then I will respond to why the wells have not been producing as predicted.Once again, the petroleum engineers say these wells don't loose but about 9% pressure the first year.

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Permalink Reply by reg on August 16, 2008 at 7:54

And the companies would not be spending 16 million to lease up a section. 56 million on 8 wells per section. If they were going to produce a commodity that did not pay off for 5-10 years.

8 wells producing 5000 mcf a day, will produce $400,000.00 per day if gas averages around $10.00 per mcf. So $74,000,000 invested in a section from leasing and wells will produce $400,000.00 dollars a day in revenue if the eight wells are all below average and the price remains at $10.00mcf. At this rate you reach payout in 180 days. Each month after that you are only concerned about monthly costs. ONce again, that is 12 million dollars in gross production per month in a fully developed haynseville section.

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Permalink Reply by Grillin' - MmmMmm on August 20, 2008 at 9:21

See my comment above. Shale wells decline at hyperbolic rates and loose 50-70% of their intitial production rate in the first year. There is a Pickering report on the Barnett Shale that shows actual well results and average curves based on thousands of wells. That is a fact. Its also what I do for a living!

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Permalink Reply by Grice on August 15, 2008 at 13:31

If you do not have a release from such liability, and a case of personal injury were to arise, you could be penalized. However, the cost of such penalty would be deducted from your share of the interest in the well. You will not be obligated to pay for any such liability from your own pockets.


"The order creating the unit shall designate a unit operator and shall also make provision for the proportionate allocation to the owners (lessees or owners of unleased interests)1 of the costs and expenses of the unit operation, which allocation shall be in the same proportion that the separately owned tracts share in unit production.

The cost of capital investment in wells and physical equipment and intangible drilling costs, in the absence of voluntary agreement among the owners to the contrary, shall be shared in like proportion.

However, no such owner who has not consented to the unitization shall be required to contribute to the costs or expenses of the unit operation or to the cost of capital investment in wells and physical equipment and intangible drilling costs except out of the proceeds of production accruing to the interest of such owner out of production from such unit operation."

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Permalink Reply by Les Bamburg on August 15, 2008 at 13:57

Sesport, the news article utilizes the term 100% royalty in error and should use 100% revenue instead. The operator must recoup any drilling and operating costs from the unleased mineral owner's revenue so the mineral owner would receive the difference.

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Permalink Reply by P.G. on August 15, 2008 at 14:20

so how much would the O&G company get out of the well if they have to divide the left over money up with the unleased land owners on a per acre basis. What percentage would O&G's take be? They don't own any acres!
The math above is dividing ALL the money after expenses up on a per acre basis, right?

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