Replies to This Discussion

Permalink Reply by Alton Lee Gilbert on October 27, 2009 at 3:59

Being a novice, I don't know how to read the information posted. Our mineral rights are in Sec 15 T16N R09W where the listing is as follows:

Petrohawk:
Sec 15 Unit
239595 LOE 15 H 010 16N 09W
232' FSL & 2136' FEL OF SEC 10. PBHL: 250' FSL & 2640' FEL OF SEC 15.
Waiting on Completion 09/28/2009


Other than the obvious location information and status, what does the rest mean (FEL, FSL, LOE, PHBL)? Petrohawk has tendered an offer, but what are rights worth in this section?

Permalink Reply by E & E on October 27, 2009 at 4:56

Hey Alton,
FEL - From the East Line
FSL - From the South Line
LOE - Name of Well - Usually the surface owners name
PBHL - Proposed Bottom Hole Location

As to your other question, that really is a loaded question. lol It is what you want to hold out for. Each person has their breaking point number.......What I can tell you is what the state just leased for in Bienville on 10/14/2009

Tract 41126
BIENVILLE, BOSSIER, RED RIVER 31, 32, 33, 4, 5, 6 T14N, T15N R10W
4 acres
$11,214.00 per acre for the first year
Rental is half of $11,214.00 for the following years.
3 years equals $22,428 per acre

Earlene the barefooted UMO

Permalink Reply by Alton Lee Gilbert on October 28, 2009 at 0:10

Thanks, Earline.

Petrohawk is offering $6,000/acre for 3 years, option for 2 more at $4,000. The truth is my wife and I are well retired and do not really need the money, and I understand a developer needing to make a profit (I've been a businessman for over 40 years). I'd like to see a win-win situation, don't begrudge them 100% profit or even more, they take a lot of risk and have substantial development costs.

I've seen reports of initial rates of over 20 mmcfd in this field, but don't know if that is typical. Assuming half that (10 mmcfd) and a 40% drop in the first year, 25% per year after that (based upon internet research on typical well-production declines), a unit of 640 acres, and a well-head price of $2.92/mcf (September numbers), the first year production should yield about $13,000 per acre, second year $8,700 and third year $6,500. So obviously, based upon the state agreement you cited, the expected initial rate must be higher than 10 mmcfd for the operator to see a reasonable return on investment.

Permalink Reply by Skip Peel - Mineral Consultant on October 28, 2009 at 2:31

Alton. Your decline percentages are far short of the range projected for horizontal HS wells. Until such time as sufficient data is available, and for financial planning purposes, I suggest you use Chesapeake's published decline rate of 81%/yr.1, 34%/yr.2, 22%/yr.3, 17%/yr.4 and 13%/yr.5.

Permalink Reply by Alton Lee Gilbert on October 28, 2009 at 4:27

Thanks, Skip,

I guess that even more emphatically makes my point. Based upon Chesapeake's published decline rates, it seems hard to justify the licensing fees to the state quoted by Earlene. Not even a 50,000 mmcfd initial well production would justify paying $11,000+ an acre for the second and third years. Which causes me to suspect that not everyone accepts those decline rates - good press for developers to negotiate lease terms, I suspect. Someone is peddling snake oil.

Which still leaves me scratching my head - what is fair to both the developer and the mineral rights owner. Danged if I know!

Permalink Reply by Skip Peel - Mineral Consultant on October 28, 2009 at 4:45

Alton, you are welcome.

There is a wealth of information regarding decline rates in the discussion archives for those who may wish to review it for further details. As to "justifying the licensing fees", IMO energy companies are much more focused on Estimated Ultimate Recoverable (EUR) calculations than on lease bonus amounts. Any disagreement among experts as to decline rates appears to be in a narrow range. For the purposes of the members, I do not see any appreciable difference between a first year decline of 81% or 85%. A variation of a few percentage points is negligible.

Permalink Reply by Landowner on October 28, 2009 at 4:56

Skip, If there is already a well being drilled in this section, why would you want to lease? Just curious.

Permalink Reply by Skip Peel - Mineral Consultant on October 28, 2009 at 5:04

Landowner, I'm not sure I understand your question. By "why would you want to lease?" are you asking why I personally would want to lease if I were a mineral owner in the unit as opposed to going UMI? I'm a little confused because the discussion thread is not about leasing.

Permalink Reply by Landowner on October 28, 2009 at 5:11

Maybe I am misunderstanding, but above Alton said he was offerred 6k for 3 years. I thought that was for a lease. If his minerals are in section 15 and there is a well being dug, why would you lease now?

Permalink Reply by E & E on October 28, 2009 at 10:26

I can sidetrack topics with the best of them :-D
Earlene the barefooted UMO

Permalink Reply by Bobi Carr ("parker") on March 2, 2010 at 16:39

Alton,

Don't forget that before all is said and done they will likely have 7-8 haynesville wells in each unit. Also you may be in an area that is productive for the Hosston, Cotton Valley and Bossier shale, and maybe even other formations.

They get all of these possibilities even with a depth pugh clause. (unless you lease only the "haynesville zone".)

Permalink Reply by Les Bamburg on October 27, 2009 at 16:15

Earlene, great collection of information. If it is okay I thought I would add the following short summary of my info for Lake Bistineau wells:

Chesapeake, Weyerhaeuser 15 #H1 Well, Serial #240380, S15-T16N-R10W
Chesapeake, Elva 25 #H1 Well, Serial #239490, S25-T16N-R10W, Bienville Parish, 10071 Mcfd, 14/64" Choke, 6756 psi Flowing Pressure
Chesapeake, Weyerhaeuser 34 #H1 Well, Serial #240104, S34-T16N-R10W
Petrohawk, Madden 6 #H1 Well, Serial #240214, S7(6)-T16N-R9W
Petrohawk, LOE 15 #H1 Well, Serial #239595, S10(15)-T16N-R9W
Petrohawk, Thrash 24 #H1 Well, Serial #240275, S25(24)-T16N-R9W
Petrohawk, Hennigan 25 #H1 Well, Serial #240276, S36(25)-T16N-R9W
XTO, WH Holt 16 #H1 Well, Serial #240128, S16-T16N-R9W
XTO, AR Collins 17 #H1 Well, Serial #240345, S17-T16N-R9W

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