New Map of Drilling Activity

New map of Haynesville Shale activity

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Permalink Reply by Skip Peel - Mineral Consultant on September 16, 2009 at 16:07
Ann. There is no minimum number of owners or, more specifically, acres that must be under lease to form a unit. And an HA well technically could be drilled on as little as 80 acres. How many acres do you own and how long have you owned them?
Permalink Reply by j garrett on September 17, 2009 at 13:35
I think Ann is asking what % of owners/mineral interest needs to be leased by the Operator for the Operator to fell comfortable proceeding to drill. What percentage of UMI is the Operator willing to deal with?
Permalink Reply by Skip Peel - Mineral Consultant on September 17, 2009 at 14:00
Only the operator knows the answer to those questions. There is no rule of thumb. And every case is unique.
Permalink Reply by Les Bamburg on September 17, 2009 at 15:14
JG, realize some mineral owners may be leased with companies other than the operator.
Permalink Reply by Henry on September 18, 2009 at 0:04
j garrett,
I don't know what is the maximum percentage of UMI acres the operator is willing to deal with. I can only tell you I know of two UMI landowners, one with 75 acres, and one with 65 acres. So, for their drillers, the percentage is obviously over 10%. Maybe if anyone has heard of a higher percentage, they can speak up??
Permalink Reply by Catfish on September 18, 2009 at 1:09
Henry, are both umi's in the same unit and have they drilled yet?
Permalink Reply by Henry on September 18, 2009 at 1:46
Catfish,
No. These UMI landowners are in different units -- far apart from each other. And different companies are drilling them. I believe both are being drilled as we speak.

Now that I think about it, I know of another unit where about 50 acres are UMI (among a variety of landowners). This is a third gas company drilling that unit. I know for a fact this unit is being drilled.

Bottom line: At least 3 companies out there have tolerated about 10% UMI in a section. I have no idea if they do this routinely. My knowledge is only on these three particular cases. Again, if anyone has numbers where they went higher, it would be nice to know.
Permalink Reply by Skip Peel - Mineral Consultant on September 18, 2009 at 2:43
Guys. I believe you are searching for a number, or percentage, that does not exist. You have to know a number of factors such as the average royalty on the leased acreage (the lower the average, the greater the UMI's that can exist), the leasehold cost (were bonuses $350/acre or $20,000/acre), the competition factor (is the section surrounded by the operators units and therefore "cut off" from the units of other operators), etc., etc., etc. If you care to spend an afternoon reviewing leases in the courthouse, you can get a better idea of the lease situation in a section but you are would still be making an educated guess. If you are looking for a range of unleased acres that would cause an operator to forgo development, I would guess that it is in the 15 to 25% range varying by the factors mentioned above and the current price of natural gas. A significant increase in the price might raise that range by 5%.
Permalink Reply by Henry on September 18, 2009 at 2:47
Skip,
I agree. That's why I was very careful to caveat my response to only three particular cases I know about. I hope readers take it as just that, and don't read anything more into it.
Permalink Reply by Skip Peel - Mineral Consultant on September 18, 2009 at 3:00
Henry. I know of at least one HA well being drilled in a section/unit with significant unleased minerals that is the result of Chesapeake refusing to honor their letter agreements and another company assuming that they would. The operator is a company other than CHK that made the decision to drill based on the total acreage leased (counting those mineral owners who had signed up with CHK). Keep in mind, the operator is rarely the only company holding leases in a given section. It is not unusual for there to be three, four or more. And since CHK pulled out of letter agreements in other sections, this may not be the only instance.
Permalink Reply by Inquirer on September 18, 2009 at 7:55
Thank you all for the discussion in response to my question. I feel so ignorant about leasing but this is our situation. CHK has drilled or about to drill in all four surrounding sections where we live. In our section, we have about 35 owners. This week, about half leased to CHK and the other half to Petrohawk. Offers began at $3,000 ending at $6,000 with CHK but Petrohawk went to $7,000 yesterday. We stuck with CHK but about half went with Petro for the extra $1,000. Owners average 2-5 acres each. Any comments about our decision. We are in Sec 13, T-16N, R15W.
Permalink Reply by Skip Peel - Mineral Consultant on September 18, 2009 at 9:38
Ann. Either CHK or HK are capable operators. If the leases contained 25% royalty and the basic clauses protecting lessors rights going forward, then based on the acreages you mention I would think that you all made good decisions. Good Luck with you wells.

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