Replies to This Discussion

Permalink Reply by Mlbjr on April 11, 2009 at 3:54

I was attempting to figure out what the cost of gas was per CF in Feb 2008 when you got the $9000. Do you know?

Permalink Reply by Frederick O. Humke on April 11, 2009 at 5:21

In Jan was 7.55/MCF, Feb 8.04, Mar 9.00, Apr 9.732, May 10.848, Jun 12.243, Jul 11.048, Aug 8.093, Sep 7.253, Oct 6.402

Permalink Reply by olddog573 on March 30, 2009 at 8:34

If these wells decline 85%/year, what's the big fuss over the Haynesville?

If 85% is correct, it sounds as though I will need to keep my day job!

Permalink Reply by Skip Peel - Mineral Consultant on March 30, 2009 at 9:00

olddog. The volume produced in that first year is prodigious. The decline is undetermined at present but probably around 80% (the first year). At summertime natural gas prices, the very best wells paid for themselves in 60 days. Now it may take six months. A lessor is well advised to keep their day job until they have accumulated sufficient savings to be financially secure. And to manage their royalty income with an appreciation for the decline rate.

Permalink Reply by olddog573 on March 30, 2009 at 10:00

With these long laterals, will they still eventually do 5 wells per section as they had originally planned? If so that should keep good money rolling in.

Permalink Reply by Skip Peel - Mineral Consultant on March 30, 2009 at 10:16

At 80 acre spacing each 640 acre section could qualify for a maximum of 8 wells. Petrohawk has been experimenting with longer laterals with the intention of fully developing a section with 6 wells. Though each extended lateral well is more expensive, the cumulative cost for full development of the section would be less. If I had a significant amount of acreage within a section, I would trade a smaller bonus for a commitment to drill the maximum number of wells in a specific time frame. It's called a "continuous drilling" clause. Some lessees would consider such a lease term.

Permalink Reply by olddog573 on March 30, 2009 at 10:27

Thanks Skip. If I am reading these threads correctly, if you don't sign a lease and decide to hold out until the well is paid for, it sounds as if you could be missing out on some good cash flow because of depletion rates plus you miss out on the up front bonus. Thanks again and this is my last response, I won't take up anymore of your time.

Permalink Reply by Frederick O. Humke on March 30, 2009 at 11:22

I was under the impression that these shale wells were periodically rejuvinated by the injection of water and steam.

Permalink Reply by Skip Peel - Mineral Consultant on March 30, 2009 at 11:45

I know that enhanced recovery methods such as the ones you mention are used on shallow oil producing formations here in NW LA. Since these shale wells are over pressured, they require no enhancement at this time. It would be interesting to hear if enhancement is possible in the future as wells deplete and formation pressures decline.

Permalink Reply by Catfish on March 31, 2009 at 2:31

olddog, I think you are right, by the time the well is paid for 100% ain't much after the rest of the deductions for transportation and whatever else they come up with are taken out.

Permalink Reply by MB on April 11, 2009 at 7:40

Skip,
Do you know of any estimates or educated guesses as to what the prolonged production rate might beyond the initial first year 80% decline? Does the curve flatten at year two and stay that way for a few years? Best

Permalink Reply by Skip Peel - Mineral Consultant on April 11, 2009 at 7:59

According to Chesapeake in their "Haynesville Shale Overview" report, projected decline is as follows:

Year 1 - 81%
Year 2 - 34%
Year 3 - 22%
Year 4 - 17%
Year 5 - 13%
Year 6 - 11%
Year 7 - 9%
Year 8 - 8%
Year 9 - 7%
Year 10 - 6%

As you can see, after year 5 the curve becomes relatively flat.

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