HOW MUCH UNLEASED, DEVELOPABLE ACREAGE REMAINS IN THE HS PLAY FOR MAJOR OPERATING COMPANIES NOT CURRENTLY ACTIVE

I HAVE LONG SPECULATED ON THE BOUNDARIES OF THE HS PLAY AND THE AMOUNT OF UNLEASED ACRES THAT REMAIN AVAILABLE FOR THE ENTRY OF NEW, MAJOR OPERATING COMPANIES. THE GENERALLY ACCEPTED CURRENT BOUNDARIES INCLUDE HUGE LEASEHOLD HELD BY PRODUCTION. LAND SPECULATORS ALSO HOLD SIGNIFICANT ACREAGE. THE REMAINING UNLEASED ACRES HELD BY LAND/MINERAL OWNERS MAY BE ISOLATED AND NOT ATTRACTIVE TO NEW MAJOR DEVELOPERS BECAUSE IT IS NOT SUFFICIENTLY CONTIGUOUS FOR DEVELOPMENT PURPOSES. AS A MEANS TO ILLUSTRATE MY THEORY, I AM INCLUDING A TOWNSHIP MAP OF NW. LA. THAT DEPICTS THOSE TOWNSHIPS WHICH CONTAIN SECTIONS THAT HAVE BEEN UNITIZED. PLEASE NOTE THAT ALTHOUGH NOT ALL SECTIONS MAY BE INCLUDED IN DRILLING UNITS, MUCH OF THE SURROUNDING ACRES ARE UNDER LEASE OR HBP. I DO NOT KNOW THE ANSWER TO THE QUESTION I POSE BUT I THINK IT IS WELL WORTH COMMENT AND DEBATE AMONG THE MEMBERS. THE HS PLAY IS RAPIDLY MATURING AS TO SIGNIFICANT PROSPECTIVE AREAS NOT LEASED, HBP OR NOT UNDER THE CONTROL OF THE LAND/MINERAL OWNER. AT THIS TIME, MY OPINION IS THAT ANY NEW, MAJOR OPERATING COMPANY CAN ONLY ENTER THE PLAY IN A SUBSTANTIVE MANNER BY ACQUIRING THE EXISTING LEASEHOLD OF ONE OR MORE CURRENT OPERATORS WITH SIGNIFICANT LEASEHOLD. IF SUCH WERE TO OCCUR, WOULD IT HAVE ANY MAJOR IMPACT ON BONUS OFFERS EXCEPTING RELATIVELY LOCALIZED INSTANCES?

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Permalink Reply by Skip Peel - Mineral Consultant on November 19, 2008 at 3:54
P.G. I would think so. But any substantive increase in ng demand is probably some years in the future. And supply is increasing so swiftly that demand has a long way to go to catch up.
Permalink Reply by The_Baron on November 19, 2008 at 4:13
Its not just a supply issue Skip, The ability to get the gas to market is a huge problem. Rumour has it that CHK wells could be as big as the five wells Petrohawk has released results on, but CHKis forced to choke back the wells due to pipeline constraints.

We need more large interstate pipelines.
Permalink Reply by Skip Peel - Mineral Consultant on November 19, 2008 at 4:39
Good point, Baron. But as connection to market is expanded doesn't the supply grow even faster.? And don't operators with huge leasehold and a clock running on lease terms/extensions have to produce even at depressed ng prices in order to maintain cash flow to fund such development?
Permalink Reply by Bobi Carr ("parker") on November 19, 2008 at 4:45
Skip,

They only need to produce in paying quantities. And they don't even have to produce in paying quantities UNLESS someone challenges them.
Permalink Reply by Skip Peel - Mineral Consultant on November 19, 2008 at 4:51
Hey, parker. I agree that they only need to produce in paying quantities to hold the lease in force. I am referring to a level of production that provides cash flow sufficient to continue to develop leaseholds undrilled. Keep in mind that most of the operators are cash strapped and there are no ready sources of credit available at this time. And probably not for quite some time. Therefore they must produce to develop even with depressed ng prices.
Permalink Reply by Bobi Carr ("parker") on November 19, 2008 at 4:53
Skip,

Good point.
Permalink Reply by The_Baron on November 19, 2008 at 4:54
I think Skip isn't talking about mantaining leases, but making enough money to pay for more drilling to hold the rest of their leases and build infrastucture like more pipelines and gathering systems.
Permalink Reply by The_Baron on November 19, 2008 at 4:56
Also, they operators could claim market restraints out of their control prevent them from selling more gas, and they they are making every attempt to work in the best interest of the mineral owner. So unless they are produceing at abysmal rates it would be tought to prove.
Permalink Reply by The_Baron on November 19, 2008 at 4:58
We would have to hope that better access to n.g would open new markets. Maybe we could expoert lng, (Spain is paying up to $18/mcf). Maybe homes in New England can finally have a good reason to convert from fuel oil.
Permalink Reply by P.G. on November 19, 2008 at 4:53
Pipelines to where?
What would they do with the gas if they could get it there?

I think NG prices would jump on speculation if the government would get behind fueling stations. Auto manufacturers would probably go into a frenzy to produce the autos.

Would there have to be a pipeline to every refueling station? Or could the CNG be delivered by tanker truck, just like gasoline?
Hybrid CNG/gasoline or diesel vehicles would keep commodity investors in check and keep prices at a reasonable level for consumers.
I'm sure the Arabs would choke on such an idea, huh?
Permalink Reply by Skip Peel - Mineral Consultant on November 19, 2008 at 5:02
PG. Let 'em choke. The pipelines that The Baron refers to are connecting the individual wells to gathering systems which are connected to transmission lines. Once in the transmission line, the gas is deliverable to end users. CNG as a transportation fuel appears to be a "no brainer". But it is politically controversial and requires that voters become lobbyists and send a message loud and clear to their elected representatives.
Permalink Reply by The_Baron on November 19, 2008 at 5:17
cng can not be transported by truck in commercially viable quanities.

I have heard of talk that the chemical industry in south LA and TX would be a good market. These areas are net importers of gas. The Northeast and midwest import gas from Canada. How about replacing that with American gas?

Better availabilty to n.g. out west could allow more elec. plants to be built in an area where elec. capacity is despertly needed.

Just a few ideas.

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