Replies to This Discussion

Permalink Reply by SoBoRes on July 23, 2008 at 1:52

Shelby,

First I am no expert at any of this but I will try to answer your question based on recent discussions with O&G. The section where we live (rural S/B) was leased hard Oct 07 - Mar 08 by a company representing EnCana. The majority of the mineral owners signed leases, leaving only a few of us (that we currently know of) unsigned. I received a call from Petrohawk and was told by them that if we could get at least 25 to 30 acres in our section they would be willing to negotiate terms and lease our minerals. It was stated that anything smaller would not produce a large enough benefit for them to move in.

Hope this helps.

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Permalink Reply by shelby on July 23, 2008 at 4:10

SoBoRes,
Thanks for the insight on your experience. It is interesting how this works regarding a competing O&G company only needing such small acreage positions. I wonder how much land makes a profitable venture; could they only put one rig on let's say, 70 acres.
Shelby

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Permalink Reply by RAY on July 23, 2008 at 5:35

only one company can drill a unit [640 acres]...but the other company can use your leased land to work out a deal

.... they will swap your acreage like swapping baseball cards .

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Permalink Reply by shelby on July 23, 2008 at 13:45

thanks RAY-T,
only one company, no "wildcats" of any sort?
shelby

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Permalink Reply by Two Dogs, Pirate on July 23, 2008 at 14:14

It is incorrect to believe that one company could hold it all, look at South Louisiana and see how their OGML are done. It may be 10 zones under your feet and each shaped a different way, and none being of squares and anything of that nature.

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Permalink Reply by shelby on July 23, 2008 at 14:31

Thomas R.
It sounds unreasonable to me also, but, with "pooling considerations as to who gets to go first, as permitted by the State, it seems like you might have to be concerned as to when you even have the right to lease to a competitive interest in O&G. It seems like if you had 100 acres, you could drill profitably, but, I don't know this, when they start to talk 80 acre spacing between wells?
Shelby

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Permalink Reply by Les Bamburg on July 23, 2008 at 17:01

Shelby, the well spacing (80 acres) will not change the size of the unit (640 acres).

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Permalink Reply by Les Bamburg on July 23, 2008 at 17:00

Thomas, only one company can "operate" (ie drill a well) in a unit (section). Other companies can have leased acreage in the section and would be non-operating working interest owners. This is the reason for unit operating agreements.

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Permalink Reply by shelby on July 23, 2008 at 17:13

LesB,
Who ultimately decides who gets controlling interests in a unit?
Does the State of Louisiana decide based upon a certain percentage of what a company has leased in acreage?
Thanks,
Shelby

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Permalink Reply by Les Bamburg on July 23, 2008 at 17:41

Shelby, I noticed several of the filings that request formation of units also request the applicant be designated operator of the unit. Other filings do not address operator but I think it is assumed the applicant will be designated operator. I believe another company with lease acreage in the unit could dispute operatorship at the hearing but it would probably go to the company with the largest acreage position. Ultimately the Commissioner of Conservation would decide.

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Permalink Reply by shelby on July 23, 2008 at 17:46

LesB,
Man, that is some way of doing business, and I guess the company that has expended the most in acquiring the greatest lease hold position, deserves the first shot at locking up the unit--seems fair enough, but, I have not thought it all the way through. From mineral rights owner position, it seems you would have options to sell to other oil and gas companies that would agree to produce on your land, if drilling agreement could be negotiated. But, that might not happen if the rules of the game don't permit. You're up late LesB.
Shelby

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Permalink Reply by Les Bamburg on July 23, 2008 at 17:55

Shelby, let me try to clarify. If a company has leased 60% of the acreage and is operator, he still pays just 60% of the cost and gets 60% of the gas. So being operator gives some control but does not generate any additional profit. The other companies with acreage still get 40% of the gas from the well and pay 40% of the cost.

By the way I am on West Coast time.

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