Replies to This Discussion

Permalink Reply by VSC DeSoto South on November 9, 2011 at 10:04

(In true 'What's in it for me' style, I apologize in advance).  I can't tell from the Mid-Bossier map if SE Desoto is in the area where they plan to drill the 20 Mid-Bossier wells? Can someone else figure it out from the map?

When ECA says they will drill the 20 Bossier wells, are they talking from the ECA/Shell joint perspective or strictly from the ECA as the operator perspective. My area is under the JV, and Shell is the operator of the well, so would the 20 Bossier wells even apply if Shell is the operator?

 

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Permalink Reply by Les Bamburg on November 9, 2011 at 10:13

VSC, you are in great shape as SE DeSoto is dead center in the core area of the Bossier Shale play.  Of course we do not know where EnCana has drilled / is drilling the 20 Mid-Bossier Shale wells in 2011. The stars on the map just depict existing Mid-Bossier Shale producers rather than the location of EnCana's 2011 wells. 

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Permalink Reply by VSC DeSoto South on November 9, 2011 at 10:17

I am reading the Q&A from the call. ECA also talks about &,00+ laterlas that cross section lines. How could that be good for a land owner? if the end of the well is in another section and only the insertion hole is in your section, you would not receive royalties? Why would I sign off on that. It also says in LA they need 100% approval by all working interest and RI owners. Would this apply if Shell is the operator, I guess eventually it would, because if ECA does then the others will follow?

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Permalink Reply by Les Bamburg on November 9, 2011 at 10:23

VSC, the production for the well is allocated to both units because the well produces from both units.  These wells have higher recoveries from the unit areas so both royalty owners and working interest owners benefit. 

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Permalink Reply by kittycatmama on November 9, 2011 at 15:06

Les, I think Encana has drilled some mid Bossier test wells in past 18 months on Jackson B Davis' property in T15N R14W in that area off Red Bluff Rd. They permitted a few of the wells in there to lower, mid, upper Jurasic, but I heard they were really testing mid Bossier.

 

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Permalink Reply by w.r. frank on November 9, 2011 at 17:04

Les,

 

Not sure yet about math. ECA has said previously that EUR is 10 bcf/well on 80 acre spacing. One section=80 bcf EUR on 8 wells. EUR=12,500 mcf/acre.

 

Slides show 1 1/2 section units with six wells and narrative says 13 bcf EUR/well. So math is 6 wells X 13 bcf/well= 78 bcf/unit. 1.5 sections=960 acres/unit. Recovery=8,125 mcf/acre.

 

I can understand capital for ECA. 80 acre spacing/640 unit= $9.5MM/well X 8 wells=$76 MM for 60 bcf (80 bcf X 75% WI).

 

160 acre spacing (960/6)= $12MM/well X 6= $72 MM for 58.5 bcf (78 bcf X 75% WI).

 

So from ECA's point of view, I spend $4MM less (5% less) and get 98% of the EUR. Then, if I am conservative on EUR and costs, it only gets better.

 

ECA is relentless on cost reduction now because NG prices are in the tank (for example, using only sand as proppant as opposed to XCO). I don't necessarily agree with ECA that is a win/win based on the math, nor do I agree that the LA. regulators will really care about royalty owners. If it is more efficient and accelerates drilling and revenue to the state, I predict that larger units will occur. You will never get 100% on the royalty owners to agree to anything, unless it is a large tract with only one or two royalty owners and who knows what concessions ECA will make to get the deal agreed to.

 

Since the concept of a royalty is a capital free and, in most modern leases, a cost free (forget CHK issues) revenue interest, I will only be concerned with the projected EUR/acre in my unit. ECA needs to work on its math relative to earlier statements on NGIP/section and EUR/well based on 80 acre spacing.

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Permalink Reply by Les Bamburg on November 9, 2011 at 17:42

WR, I am not sure your source of information as EnCana has used ~ 6.5 to 7.0 Bcf per well in the past.

 

Check Page 10 which shows three adjacent sections being developed by 3 original traditional length wells and 14 extended lateral cross section wells.  Note also EnCana shows 13% higher recovery for this approach hence the benefit to royalty owners.  Intuitively this should result in higher recoveries since the wells are draining ~ 160 acres (2 * 80 acres) along the two east west unit boundaries with each consisting of an area of 660 ft by 5280 ft.  

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