Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on September 12, 2017 at 13:41

IMO, an end user also acting as operator of natural gas wells would be bound by Article 122 of the Louisiana Mineral Code which requires that the lessee is "bound to perform the contract in good faith and to develop and operate the property leased as a reasonably prudent operator for the mutual benefit of himself and the lessor".  Under 122 Tellurian would likely choose a sales point that makes sense and would be defensible in court.  For example, the monthly settlement price at the Henry Hub would fit that description.  If so, Tellurian would pay royalty interests in their operated units based on that price.  Tellurian could not make up a price or choose a sales point that didn't fit the operating area and the location of the end use.

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Permalink Reply by Jesse Joyner on September 12, 2017 at 17:17

Most mineral owners know that few, if any, Haynesville operators are presently paying the Henry Hub price for NG. Anyone who checks their monthly statements sees a wide discrepancy between the hub strike price for a particular month and what is being paid to mineral owners. When asked, some operators say they are selling at a day price, which at times can be $1 less than the HH strike price for a particular month. So unless a mineral owner can hire a lawyer to confirm there is not a NG price manipulation to the operator's advantage, the little guy is getting the hit. Odds are that Tellurian will go for maximum profit to cover its less than sweet spot acquisition, which means it will pay what the market will bear. 

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Permalink Reply by Skip Peel - Mineral Consultant on September 13, 2017 at 1:51

The net royalty paid to Haynesville Shale mineral lessors is based on a price at a sales point less post production deductions.  For the majority, the problem is not the price at the sales point, it is the nature and amount of the deductions for transportation and treatment.  As Jay rightly mentions, there is no way to know what those deductions may be until Tillurian's gas is flowing.  GHS members with minerals in the existing units that are included in the 9200 acres can report to us any changes in price and/or deductions when the change of operator occurs (most of the acreage is HBP and paying royalties now) and again when Tellurian's LNG facility is operational.  Much can happen along the way to funding and constructing a major LNG export facility.

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Permalink Reply by SL on September 13, 2017 at 2:33

Skip, in your opinion, when do you think we will know which units/acres will be included?

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Permalink Reply by Skip Peel - Mineral Consultant on September 13, 2017 at 2:37

I doubt that will be announced specifically but when the seller is identified I can post the units they operate.  After the sale there will be a change of operator process with the state but that will likely take a little longer.  If you'll remind me when the time comes, I'll post a list of their units by section-township-range.

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Permalink Reply by SL on September 13, 2017 at 2:52

Thanks so much!

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Permalink Reply by Skip Peel - Mineral Consultant on September 14, 2017 at 8:11

SL, I don't think we need to wait to hear the answer.  I'm sure Jay is correct that these are the LA Haynesville Shale Units of Samson Contour, now Rockcliff.  The vast majority of Haynesville assets that Rockcliff acquired are in Texas.  They had to take the LA rock to get the TX rock and then they looked to divest the relatively small LA acreage.  Although the press releases have as yet not named the sellers the key statement is that the 9200 acres has 19 producing wells.  The exact number of producing wells that Samson Contour has reported to the state.  Here is a list of those 19 wells.  I have bolded the section-township-range to help members figure out if their minerals are included.

239551	HA RA SUF;WOOD 30 H		10				S322	1843	12-MAR-09	030-14N-09W	41
240191	HA RA SUM;WOOD 31 H		10				S322	1843	03-SEP-09	031-14N-09W	41
240288	HA RA SUL;BREEDLOVE 36 H		10				S322	1843	05-OCT-09	036-14N-10W	41
240329	HA RA SUJ;BREEDLOVE 25 H		10				S322	1843	13-OCT-09	025-14N-10W	41
240542	HA RA SUA;PRIEST 12 H		10				S322	2584	08-DEC-09	012-11N-11W	16
240781	JUR RA SUB;BLACKSTONE 2 H		10				S322	6562	29-JAN-10	002-13N-09W	41
240890	HA RA SUN;SPEED 32 H		10				S322	1843	22-FEB-10	032-14N-09W	41
241542	HA RA SUY;MAYFIELD 9 H		10				S322	4313	16-JUN-10	009-17N-15W	09
241590	HA RB SUHH;RUFFIN 6 H		10				S322	7651	28-JUN-10	007-11N-10W	16
241819	HA RB SUEE;RAMBIN 36 H		10				S322	7651	09-AUG-10	036-12N-11W	16
241878	HA RB SUGG;RAMBIN 1 H		10				S322	7651	18-AUG-10	036-12N-11W	16
241934	HA RA SUBB;BLUE 8 H		10				S322	4319	25-AUG-10	008-10N-10W	35
242003	HA RB SULL;OXBOW 8 H		10				S322	7651	13-SEP-10	008-11N-10W	16
242581	HA RA SUC;SAMUELS 18 H		10				S322	2584	29-DEC-10	018-11N-10W	16
242864	HA RA SUN;MOFFETT 13 H		10				S322	4319	02-MAR-11	013-10N-11W	16
242924	HA RA SUI;UTLEY 11 H		10				S322	2584	14-MAR-11	011-11N-11W	16
243497	HA RA SUJ;ADAMS 19 H		10				S322	2584	06-JUL-11	019-11N-10W	16
243600	HA RB SU90;NRG 29 H		10				S322	7651	28-JUL-11	029-12N-10W	41
243676	HA RA SUAA;CREST 5 H		10				S322	4319	12-AUG-11	005-10N-10W	35

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Permalink Reply by SL on September 15, 2017 at 9:18

Thanks, Skip.  Any news on a company named Empire purchasing 11,200 acres in Haynesville?

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Permalink Reply by Skip Peel - Mineral Consultant on September 15, 2017 at 9:27

"In the Haynesville" is a little problematic.  You see, the Haynesville Shale is only a small portion of the Haynesville Formation.  The rest is the Haynesville Sand.  Big, big difference.  The purchase you refer to is not the Haynesville Shale.  Here's a cut and past from an article on the Empire acquisition.

Empire Petroleum Corp. said Sept. 6 it entered a term sheet to acquire producing Haynesville assets in North Louisiana.

The assets comprise about 11,000 gross (9,000 net) acres of leasehold HBP in the East Haynesville and Oaks fields in Claiborne Parish, La. Current production is about 400 barrels of oil equivalent per day from 28 wells, with net cash flow of roughly $200,000 per month.

The seller and terms of the transaction were undisclosed. The wells to be included in the transaction target the Pettit, Lower and Upper Haynesville, Cotton Valley and Smackover reservoirs, according to the company release.

Permalink Reply by Skip Peel - Mineral Consultant on September 15, 2017 at 10:34

Claiborne Parish is far removed from the nearest active, economic Haynesville Shale well.  And, the Haynesville Shale does not produce liquids, just dry natural gas.

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Permalink Reply by olddog573 on October 7, 2017 at 11:30

It's official, got my Tellurian letter today stating they purchased my Samson/Rockcliff wells in southern Desoto Parish

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Permalink Reply by Skip Peel - Mineral Consultant on October 7, 2017 at 12:42

Thanks for the heads up, olddog.  What a lot of us would like to know is the net mcf price on your first Tellurian royalty statement.  Particularly, if it is different from your most recent statements from Samson, or Rockcliff.  Tellurian is making a point to promote this acquisition as a means to undercut the prices paid by other LNG export competitors.  They are specifically mentioning $2.25/mcf as their "all in" cost at their LNG facility when they begin exporting.  That may sound good to the "Street" but is a a bit of a concern for lessors in their units.

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