I heard today that some of the big players i.e. Chesapeake, were running out of capital because of leasing up so much acreage in the area and that they were going to stop leasing and start drilling to raise capital. The person I was talking with said they were told that it would be after the first of the year before they would get their leasing bonus.
How much land can the O&G realistically lease and drill upon before the lease time runs out?
I can't see them paying enormous amounts of money for leases and then let them expire! The only good I could see of it would be to keep the competition out.
So those who haven't leased should be patient. I imagine when the o&gs catch up with what they've invested in, they'll be coming for those unleased minerals.
P.G. I agree with you. For those of us that haven't received the big bonus offers like we've been hearing about on this site, be patient. It's not that your land isn't worth as much, like the o and g companies would have you believe, It may just be that they can't drill every landowners well in the 3 year lease period,so why give away big bonuses for a lease if the other oil companies are too busy elsewhere and aren't competing in your area. Also it seems that Chesapeake and Petrohawk have been offering the best terms, and I would also assume that they have the most experience, better equipment, and a higher success rate at getting the most product out of your property. I think we all can agree that the demand for natural gas is only going to increase, and the price might fluctuate but will remain high, so I am in no hurry to make a bad deal. I look at it like having money in the bank making very good interest.
The o/g company you lease to doesn't have to drill to make money from your lease. They can just sell your lease, at a profit, or borrow against it, or use it to increase their financial statement, which increases their net worth to a potential purchaser of their company and many more uses etc.
The o/gs would like to slow the rate at which lease bonuses are increasingin this play. In just a couple of months the bonus rates reached the same rate of the Barnett play which is several years in the making.
As time goes on more well results will have to be released which will help hold lease rates at no lower than $20K/acre. Do yourself a favor, so you can be patient, read the Natural Gas Act which gives tax breaks for using natural gas. One tax break is giving every gasoline station $90K for every compressed natural gas pump they install. This play is big and the o/gs are putting things in place so the USA uses natural gas as it's #1 engery source. TCB DS2
The structures the o/gs are putting in place via this bill will create a larger market demand for natural gas. Natural gas will become the #1 energy source in the US. This play caused oilmen like Boone Pickens to see the "light" and that light was natural gas most of which will come from this play. TCB DS3
That bill tells you how much gas must be in this play if there is enough nautral gas to supply all the uses they have tax credits covering. Now, if we just get a one-time lease bonus lower tax rate,i.e. 15%, added for all landowners it would become a great bill:) TCB DS3
I am no expert either, but in my travels in nw La. which I do 5-6 days a week, I see alot of rural areas and I see where the drilling rigs are and what direction they are moveing in. There are only a few compines doing what I would call test wells,and they are scattered around eastern Bienville parish, Jackson parish, Claiborne parish, but the real push is still in Red River, Caddo, Bossier, Desoto, and now Natchitoches parishes. The o/g seem to be doing this in a carpet bombing type of drilling action over all. The other (test wells) are scattered around with just a few wells in an area then they move to another area. Every well that I have seen drilled in the (test wells areas) seems to be produceing wells. Why would they not do the carpet bombing drilling here also, because it seems to be no pattern to their efforts as to trying to holding leases. I like many others wish I could be a fly on the wall in some of the meetings to get a better understanding of there course of actions.
Not all the drilling going on is drilling into the Haynesville Shale, we must remember. There's a lot of exploration taking place for those shallower depths, a lot of Cotton Valley wells going in, even in the hot areas like here in DeSoto. Winchester Petroleum is continuing to drill their leases into the Cotton Valley formation, for example. And some say that this pattern of drilling is just a way to hold leases, but my belief is that they're out to make money, and they can make some money off the upper depths. So, the drilling that you see taking place all over isn't necessarily the drilling of test wells. After all, since the price of natural gas is up, it makes it much more economical to drill for everyone, even the smaller operators who can't compete in the Haynesville Shale. Maybe they are just proceeding on a course of action that was planned even before the big boom began?
I agree Mr. Mcwilliams. It just seems odd that some of these other areas have been drilled in the past only to be told it was a dry hole. No CV formation here. Now all of the sudden there is CV ? A lot of the intel concerning all of these CV wells that are being drilled seem to be taking place below previously recorded depths for CV. Add that too the disturbing attempts at zone reclassification and the rookies ,like myself ,start getting leary. I also see it as extremely poor economical judgment for these companies to be going after CV if they leased at H/S prices. Just my thoughts on it. I enjoy your posts Mr. Mc
As exciting as this is, we know that we have a responsibility to do this thing correctly. After all, we want the farm to remain a place where the family can gather for another 80 years and beyond. This site was born out of these desires. Before we started this site, googling "shale' brought up little information. Certainly nothing that was useful as we negotiated a lease. Read More