The well I ask about in a previous lease pool section where they said they could write in a clause so I could keep my Haynesville Shale rights while they drill for Cotton Valley Sand, but they also are saying that they will be drilling another well or possibly this one for Gray Sand. The Gray Sand depth is about the same as the Haynesville Shale depth, so how can they say I retain my Haynesville Shale rights? It seems they could call them the same and should possibly need to pay Haynesville Shale leasing rates when going for the Gray Sand. Gray Sand depths for this well came from the Office of Conservation Order #10-EE 4.
Any thoughts on this?
I would like to bump this foward in an effort to ask Jay what should laymen look for as clues that must be reported to sonris to indicate that the transition area is being approached where the shale turns to sand.
Jay, does my memory serve me correctly that the Gray Sand is a sand that is present in a few areas but comes and goes more so than the other targets in this area? Seems like I remember that when I was working it.
Let me take a whack at this one. Go ahead and limit the depth based upon the Gray Sand interval as defined in your section (or applicable order), and then add the following to your lease:
'Notwithstanding anything to the contrary within the printed lease form or as amended by this Exhibit "A", it is understood by Lessor and Lessee that this lease shall only cover those oil and/or gas bearing strata and/or interval(s) from the surface of the earth to the top of the Gray Sand formation (as originally defined under Conservation Order No. 10-EE-4, Cotton Valley Field, or as such definition may have been amended to date) possessing such physical properties and characteristics, including but not limited to relative permeability and porosity, so as to be considered a geologic sandstone, chalk or limestone. Any strata or interval possessing such physical properties and characteristics, including but not limited to relative permeability and porosity, so as to be considered a geologic shale or otherwise unconventional source rock of similar character ("shale") is hereby excluded from this lease, irrespective of whether such strata or interval(s) have been unitized, force-pooled or previously defined within an interval or zone which contains sand, chalk, or limestone, as defined above, by Order of the Commissioner of Conservation, Louisiana Department of Natural Resources. Any attempt to drill, rework, or operate a well or wells either on the lands leased herein or on lands pooled therewith in such a manner so as to perforate or hydraulically fracture any such shale or unconventional source rock underlying the leased lands, or lands pooled therewith, so as to attempt to produce from any such formation shall constitute a breach of this lease, ipso facto, and Lessor shall have the right, at its sole option, to (a) terminate the lease in its entirety, effective the date of said breach, (b) demand from lessor liquidated damages in the amount of $10,000 per net mineral acre leased, payable with ten (10) business days of receipt of Lessor's written demand, (c) the right to escalate the royalties paid under the terms and provisions of this lease by amendment, without Lessee's joinder, to one-half (50%) of the proportionate share of oil, gas, or other minerals produced under the terms of this lease, effective the first date of production attributable to the lands leased herein, (d) the right to recover legal interest, and reasonable attorney's fees and other compensation as may be required by Lessor in enforcing or defending its rights to impose such sanctions, said fees may not exceed 25% of the monies so recovered. Such sanctions may be imposed by Lessor in whole or in part, singularly or in total, or in any combination thereof, at his sole option and discretion, on any and all such occasions as Lessor acts in breach of this lease as contemplated herein.'
You wanted teeth? Here's a mouthful. Talk amongst yourselves; this can probably be retooled and refined a little (first draft).
And everybody just thought I was in the tank for O&G. Truth is, I don't think that any operator will go for all of this; but it would show that one means business and the lessor isn't just going to be a cupcake.
I just got a vision on reading the initial backstory that Gypsea was willing to ask the tough HS questions and was getting some 'well you know, we're looking for CV, but there *might be* a Gray Sand target... blah, blah, blah... It's not that I call BS (there are Gray Sand reservoirs defined in Conservation Orders all over this particular field); I just remembered something Jay said about some 'suspect' looking intervals being unitized in the Lower CV, or the CV 'D' or Buckner intervals, or possibly even in Gray Sand definitions pre-July '08, and a couple of alarms went off. Some of these HS prospect wells are being permitted as 'non-unitized Cotton Valley Stringer'. Wonder where they're going.
More than one well per section... hmmm, will have to think about that one. You could probably tie it to minimum royalty payable and/or decline from initial production rate, as LOC seems intent on keeping these units at 640+ acres spacing. A timeline would likely be voidable if it's considered not to be 'reasonable and prudent'. I'll let you know.
Honestly, I was kind of figuring that someone like KB would start tinkering with this. Now where did she go...
Dion. I hope that many members are reading this thread. I have never thought you were "in the tank for O&G", though what do I know as I'm just an independent landman. I do think I am in a position to recognize advise and information that is beneficial to GHS members. And appreciate the manner and tone in which you offer your opinion. And obvious experience. I am one of the first, I think, to sniff out GHS members who are connected to the industry and on-line with us for less than transparent, or admirable, reasons. And I alert Haynesville whenever I think that they may be attempting to take advantage of the trust that many have worked to build. We are a community of diverse opinions and backgrounds. But it burns my patooty whenever someone appearing to be from the "industry" makes condescending remarks or makes an obvious attempt to mislead. You have taken your share of flack from those who tend to discount or seek to discredit anyone in the business. Yet you are still willing to engage the members in substantive dialogue. My hats off to you, Dion. Thank you.
Like I said, a couple of bells when off when I read the headline item and backstory. As a l/o, I'd much rather deal with somebody saying, "I just want the CV" in this climate, and negotiating accordingly (b/c frankly IMO Hosston and CV prospects are going to wither and die under these conditions unless they separate themselves from the HS play, much like the one you were trying to put together recently).
Except in some choice areas, a lot of these HOSS/CV/LCV wells IP rates are 7%-20% of the average IP rate of the HS well, even less if you look at the last round of completions recently announced. The scale of the economics can't stand up to HS bonus rates and 'before the bit' costs until far down the road. Unless you force everyone to become HS producers first, then adjust terms after HS depletion to allow for economic reworks/recompletes uphole. Additionally, not every operator has the capital and cost tolerance to be a HS player, although there are more than a few HS players in the Arklatex that are crackerjacks at drilling and operating in the HOSS/CV/LCV intervals.
I'm assuming if someone actually frac'd one of the zones they are leasing but accidentally the frac grows out of zone and into a shale, this would trigger the "teeth"? Right? These things do occur and quite honestly, I'm not sure anyone would know about it. Something to think about, though.
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