State leases are generally the last leases taken after operating companies have largely assembled their private leases.  At least one reason for this is that state leases are only effective for one year.  If not drilled in that time, the lessee must make an additional bonus payment to extend the lease and the extension is limited to one year.  After the second year passes an additional bonus payment is required and no state lease may have an effective period longer than three years.  Also of interest to mineral owners in the prospective area, state leases require a minimum quarter royalty.  We can revisit that in the future if the first wave of wells are economic.

The auction of June 10 will include 23 tracts in Rapides, Avoyelles and Evangeline parishes covering 1326 acres.  The number of tracts is actually more important than the total acreage because these state leases will fill in the missing pieces of the leasehold previously taken from private owners.  Traditionally the taking of state leases, particularly this many, signals the start of drilling programs.

So for all those member waiting to see well permits and rigs running on their lands, your wait is almost over.  Good luck to all.  Here we go.

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Replies to This Discussion

Skip,

Good answer as to your second paragraph. Time will tell as to how well and where (if anywhere) the AC hz frac play will work in Louisiana.

At least operators are trying to make the play. Plus the TMS back on track again with Australis effort.

I anticipate some issues with supply and contractors (frac crews, proppant availability, rigs, etc.) as both the AC and TMS now are competing with for Haynesville Shale equipment and contractor effort.

RM, good point regarding field services.  The Haynesville/Bossier/Cotton Valley area is already playing fifth or sixth fiddle to other major plays and the number of drilled but not completed wells is up to 321 as of the end of May.  Haynesville focused operators are employing multi-well zipper fracs and it will be interesting to see if any of the completion companies now under contract will go to central LA for a single well completion.  If so, I think AC operators will be paying a premium.  I think AC operators may need to get together and cooperate on a schedule that makes it worth while for one completion crew to be dedicated to the play.  Of course, COP, EOG and MRO can pay the premium for exploration, don't know about the smaller players.  Could get expensive.

As always thanks for the valuable information Skip!

You're welcome, John.  Where shall I send the bill?  :-)

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