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Title: A new record set in the Barnett Shale
Post by: Rockdale on October 01, 2008, 04:38:14 pm
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It's interesting to observe that in the midst of a very shaky economy characterized by financial distress and a substantial drop in energy prices, that a new record was set in the Barnett Shale for a gas lease. As reported by the Forth Worth Business Press, several neighborhood land owner associations have just signed with the XTO corporation a 5 year lease for their properties that is the highest ever recorded so far. The terms include a payment upfront of $25,000 per acre plus a 26.5% royalty. In addition XTO had to agree to extremely stringent conditions in regards to where they could set up their drilling rigs because the locale is apparently a heavily built up area. It's certainly not cheap to lay pipelines either in that area, because if what I'm reading is correct, pipeline right of ways routinely run over 100 dollars per linear foot, with some prices recorded in the 150's. It's also of note that, apparently, the gas produced in the Barnett is not of particularly high quality. Chesapeake's top executives in a recent conference call, mentioned that the Haynesville Shale gas was some $1.50 a thousand cubic feet higher priced than the Barnett's (for some unspecified reason). Bottom line from the above is that if the resource is sufficiently valuable, companies will pay top dollar even in a generally unfavorable environment.
Buck
Title: A new record set in the Barnett Shale
Post by: Rockdale on October 01, 2008, 04:38:14 pm
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It's interesting to observe that in the midst of a very shaky economy characterized by financial distress and a substantial drop in energy prices, that a new record was set in the Barnett Shale for a gas lease. As reported by the Forth Worth Business Press, several neighborhood land owner associations have just signed with the XTO corporation a 5 year lease for their properties that is the highest ever recorded so far. The terms include a payment upfront of $25,000 per acre plus a 26.5% royalty. In addition XTO had to agree to extremely stringent conditions in regards to where they could set up their drilling rigs because the locale is apparently a heavily built up area. It's certainly not cheap to lay pipelines either in that area, because if what I'm reading is correct, pipeline right of ways routinely run over 100 dollars per linear foot, with some prices recorded in the 150's. It's also of note that, apparently, the gas produced in the Barnett is not of particularly high quality. Chesapeake's top executives in a recent conference call, mentioned that the Haynesville Shale gas was some $1.50 a thousand cubic feet higher priced than the Barnett's (for some unspecified reason). Bottom line from the above is that if the resource is sufficiently valuable, companies will pay top dollar even in a generally unfavorable environment.
Buck
Views: 35
Replies to This Discussion
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Permalink Reply by Snake Stewart on
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Hey Buck , the cost difference may come from the fact that our gas seems to be cleaner. Doesnt have to be "scrubbed"? No compression costs associated with us either.Gas should flow for quite some time without compression, being choked the way they are.
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Permalink Reply by Les Bamburg on -
SS, the cost difference is related to the gas markets accessed and transportation costs. Barnett Shale gas is sold into Midwest markets while Haynesville Shale production can access pipelines delivering gas to the premium Northeast markets. For 2008 this equates to a difference of about $1.50 per Mcf. This difference may decrease as HS production ramps up and creates capacity constraints. Also the new pipelines laid across North La gave Barnett Shale production better access to the Northeast markets.
By the way, did you see my Barnett Shale production plots?
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Hey Les, could you point me in the direction of your plots? I havent been as dilligent as of late and am not on top as I would like to be.
There should be cost differences associated with the 2 items I made mention of tho shouldnt there? Would it go the other direction in price, being as it is less costly to produce so it would be less expensive to market ? Thanks and have a good one. Snake
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Permalink Reply by Les Bamburg on
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SS, the link to my Barnett Shale plots is shown below.
There is a cost difference and primarily related to compression since the gas qualities are similar. The cost difference comes into play when we have these lower gas prices. The costlier areas to drill and produce will be less competitive and have drilling activity reduced. The Haynesville Shale's lower cost and higher price is reason it's drilling levels will not be impacted by the lower gas prices. Cost begins to impact price when production is cut back and reduces the gas oversupply situation.
http://haynesvilleshale.ning.com/group/gasoilpros/forum/topic/show?...
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Makes sense. Thanks Les!
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