Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on January 17, 2013 at 5:27

Your Cotton Valley rights are held by production from the Haynesville well.  Standard vertical Pugh clauses, such as yours, release all depth below (not above) the deepest depth drilled.  Horizontal Cotton Valley wells have spacing similar to horizontal Haynesville wells.  The CV wells in question are not "oil" wells.  They are "gas" wells which produce sufficient quantities of "liquids" including oil, condensate and Natural Gas Liquids (NGLs) to be profitable at today's depressed natural gas prices.

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Permalink Reply by RONNY on January 17, 2013 at 6:49

As I suspected.  Thanks Skip.

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Permalink Reply by kittycatmama on January 18, 2013 at 4:48

Glad you asked that question Ronny. I was curious too if Haynesville held other formations ABOVE it.  Guess we know now

 

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Permalink Reply by Robert Griffin R on January 29, 2013 at 3:05

Skip, will Indigo be bound by all terms of existing Chesapeake leases such as royalty terms, no surface rights, etc? If a mineral owner has no Chesapeake lease can a separate lease be negotiated with Indigo or will they simply be considered UMO until the CV well pays out? Lastly, is the cost to drill a CV well much if any less than a Haynesville well? Thanks for your responses.

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Permalink Reply by Skip Peel - Mineral Consultant on January 29, 2013 at 3:17

Robert, yes.  It doesn't matter which company is drilling what depth/formation as the development rights are covered under the one lease.  In a number of the sections experiencing CV development CHK held the lease and assigned the CV rights to Indigo in exchange for Indigo  assigning the "deep rights" to CHK in sections where they held the lease.  The Haynesville wells HBP all the depths in leases that do not have a custom depth clause.  I suspect that the CV horizontals are marginally less expensive than the Haynesville Shale wells.

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Permalink Reply by W. Carter Richardson on January 18, 2013 at 5:09

Skip,

With all the CV drilling going on, has a "Sweet Spot" map been posted as of late & are the decline

rates on par with the Haynesville?    Thanks in advance.

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Permalink Reply by kittycatmama on January 18, 2013 at 5:30

It seems that the CV drilling is being done by Indigo which has the shallow rights on most of Chk's leases. Are any of the other players, i.e. Encana,Exco, BP drilling the liquid play?

 

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Permalink Reply by Skip Peel - Mineral Consultant on January 18, 2013 at 15:41

Carter, unlike the Haynesville Shale, the Cotton Valley formation is a conventional reservoir. It will vary in petrophysical characteristics over relatively short distances. When considering CV liquids, it appears there will be a multiple sweet spots.  IMO a number of operators will publicize their liquids rich areas in upcoming investor presentations.  The problem with significant liquids production is one of infrastructure.  As more NGL treating and transportation capacity becomes available, more operators will drill wells where they think they can produce some mix of liquids: oil, condensate and Natural Gas Liquids.  I think that Indigo and Wildhorse were the first operators to target liquids in NW LA.  Chesapeake has followed and Anadarko is looking to extend their E TX liquids production into northern Caddo and Bossier parishes.  Besides Anakarko, I think BP and Devon are amping up their liquids exploration in E TX. 

Indigo should have sufficient production history on their S Caddo/N DeSoto CV liquids to model a decline curve but I have not seen a statement in that regard.  But then again I haven't looked lately.  For those who would like to get a perspective on the possible extent of the CV liquids play in E TX and N LA I suggest that you look at the maps posted by Indigo on their website.

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Permalink Reply by CaddoKid on January 23, 2013 at 15:27

Wow, Mr. Peel- that is just quality information! Thanks so much for your willingness to share your knowledge.

We signed a Haynesville contract w/ CHK in Oct. 2007- in 15-16-17, before the lid blew off the secret- and those dogs made me wait for nearly a year before going from $200 to $250/acre on the bonus. But I did have both vertical and horizontal pugh clauses in the contract. Anyway, the proposed CV units and force-pooling letters have come from Indigo's attorneys, as discussed here:

http://www.gohaynesvilleshale.com/forum/topics/new-cotton-valley-un...

and a land man representing Indigo called and left a message when I was out. Haven't returned the call yet, but I assume they're wanting to talk about a new lease in the CV. They're going to need us, since we're about 16% of the unit. I should try to find those sweet spot maps and investor presentations you mentioned above. Any info on going bonuses and royalties for people being signed in these new units (CV RA SU130-CV RA SU144) from anyone is much appreciated.

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Permalink Reply by Skip Peel - Mineral Consultant on January 23, 2013 at 15:34

There are few new leases required in most of the sections now being targeted for horizontal CV liquid wells owing to the fact that most have producing Haynesville wells and leases that have either no vertical Pugh clause or a standard vertical Pugh that releases formations below the deepest depth drilled or produced.  Since the CV sands being targeted are shallower than the Haynesville they are covered under the existing leases which are Held By Production (HBP).  If you don't have a custom depth clause that excludes the CV group the landman is probably calling about surface operations.  A right-of-way, a well pad, a road - something along those lines.

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Permalink Reply by CaddoKid on January 23, 2013 at 15:45

OK, thanks. I don't have the contract in front of me, but I don't think the vertical pugh clause specified exact depths or formations. The landowner representing lawyer I used told me the vertical clause protected my rights to other formations- if it doesn't protect the CV, then I think I need a new lawyer! In any case, I've learned something that I will apply to the next unleased tract.

Thank you again.

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Permalink Reply by Skip Peel - Mineral Consultant on January 23, 2013 at 15:54

A standard vertical Pugh releases all formations below the deepest depth drilled at the expiration of the primary lease term - end of year three on a three year term.  Not all lawyers are experienced Oil and Gas attorneys.

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