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Permalink Reply by olddog573 on July 11, 2008 at 12:45

Yep! Know 2 people that it has happened to. My question is, aren't royalties due the people that were not contacted about leasing years ago and who now can't accept lease payments because of these shallow holding wells?

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landownerPermalink Reply by Mom A1 on July 11, 2008 at 12:51

This may seem a bit harsh....but

I would not be surprised at all! I feel like I'm there! If the well is "producing" then the landowner could be stuck in the lease.

Anyway, I've called my O&G people and they have told me that the well is "producing" and someone would have to call me back if I had any more questions. That was over a month ago. Still not a single call back. Don't think I'll ever hear back at this point and have given up hope.

We were sucked into this lease years ago without knowing all of our options and now we have to suck up the tears and deal with it. So, I would not be surprised AT ALL if the O&G people are planning on drilling shallow wells that produce $10 royalty checks for everyone for the next 10, 000 years(exaggeration). Why would they do any different??? This gives them time to line out the margins of the shale and decide where the really big producing areas are. This buys them time and decision-making leads. These are top-notch, business-minded individuals with nothing to gain but a fat profit margin.

If you have not signed a lease yet, make sure that you have specific lease terms lined out stating what you want NOW before it's too late for you, too.

Mom

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landownerPermalink Reply by Catfish on July 11, 2008 at 13:21

Perhaps they may do this on old lease money but not on a 6m+ lease pay out. If they invest this kind of money they will produce. And by the way production is where the bucks are.

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Permalink Reply by Snake Stewart on July 11, 2008 at 13:42

There are few areas except for the closed bid deals that are even close to $6m lease payouts sofar.And I am quite sure they will blow right past those $6m deals to get to $12m to $18m deals ,with shorter terms and more protection for owners ,that are in the near future for O & G 's.It's not a matter of production as much as it is a matter of time to produce or lose. People that folded early ,for the most part ,would fold early again. Big Boy leases are a totally different animal altogether. O & G's will never have to come to the table again with these guy's if they can help it. Big boys will have depth protection and minimum royalty payments to keep from getting trapped by shallow well games.

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Oil & Gas ProPermalink Reply by Les Bamburg on July 11, 2008 at 19:34

David, shallow wells may be an option in some areas but much of the leased acreage is in new areas without any shallow production potential. In those regions it is likely the operator will intially drill one (maybe two) HS well per unit to put the leases in a HBP status. Then later return and fully develop the section. The royalty from a single well may be decent but not huge (maybe $1000 per acre each year).

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Permalink Reply by Ladyoaks on July 11, 2008 at 21:10

Agree with Les's view. But, to be sure, the price of gas is extremely high right now. Don't think O&G's aren't out to pump as much of this stuff out of the ground as quickly as possible. That will only be tempered by the ease and slight cost of ability to move down the road a bit.

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landownerPermalink Reply by David Smith on July 12, 2008 at 0:49

Les,

Would you mind contacting me directly? I can't figure out a way here to provide you my e-mail address other than just giving it to you here. drs4614@gmail.com Thanks.

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Permalink Reply by Snake Stewart on July 12, 2008 at 6:49

Hello Les B, You always bring it straight, so here goes . The one thing that has confused me the most is the matter of potential. Some of the wells going in around me are "lower cotton valley" or " hosston sand ". Are they just now realizing potential or is this simply to cause confussion for the novice ? This part of the country has been hammered over the years by your Crystal Oil's ,etc. How in the world could they have missed my area for all these years, if that is what has happened? When you look at an aerial of South Webster, We look like we live in the dead zone. Thanks

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Oil & Gas ProPermalink Reply by Les Bamburg on July 12, 2008 at 9:27

SS, a lot of increase in activity over the last few years in the Hosston and Cotton Valley are related to the improvements in drilling technology (horizontal drilling & fracing) and increase in natural gas price. This has allowed independent O&G companies to make economic wells. This was the driver for Chesapeake, Questar, KCS (Petrohawk), etc buying into NW Louisiana. The same thing has happened in East Texas. Now these companies have lucked into sitting on one of the largest non-conventional gas plays in the US.

The areas further to the south (Red River, Natchitoches, etc) have less potentional for production in the Cotton Valley and Hosston Formations.

I hope this answers your question. By the way I am familiar with Crystal's failed attempts to produce gas from the Haynesville "Sand" many years ago.

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Permalink Reply by herefordsnshale on July 12, 2008 at 5:52

This would be my worst nightmare! A "clunker" well tying up my mineral rights and producing little. This kind of ties in to another rumor I've heard: that the companies are going to start approaching landowners with less than two years on their leases and offering them more money for longer leases. Predictions are that lease bonuses could be as high as $50,000 by the time those leases expire and they could possibly tie a lot of them down longer for substantially less. My question is: would it be cheaper for them to go this route, or to drill clunkers to hold production. I don't know enough about the cost of drilling to know which would be the cheaper route for them to go.

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Permalink Reply by Mit on July 12, 2008 at 7:07

One big problem exists with the shallow well theory. Much of the land leased does not have oil or gas under it except for the HS. Smaller companies holding leases they originally intended for shallower production may try to speed up production in order to hold the lease. They will do this in hopes of selling or partnering with a larger company to horizontal drill the HS at a later date. This would affect people who signed a year or even years ago. These landowners missed out on the big bonuses because their land was originally leased in hopes of shallower production. Once the HS news and big bonus money news hit, they started counting the months until their lease expired.

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