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Permalink Reply by John Denison on April 9, 2020 at 6:29

I've been curious to see who the top players are in today's arena. Thanks for posting. Go go Indigo!

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Permalink Reply by Skip Peel - Mineral Consultant on April 9, 2020 at 6:59

You're welcome, John.  Just a little something to pass the time and entertain the members.  Some may be surprised that after two large asset sales and little recent drilling, Chesapeake is #3.  Imagine what Comstock's Haynesville footprint would look like if it ever completed the acquisition of Chesapeake's remaining Haynesville/Bossier assets. 

The fact that north Louisiana is the driver of state natural gas production is brought home by the fact that the top south Louisiana producer is 38,926,870 mcf.  It still amazes and disappoints me that we don't get recognized for our contribution to state production by mainstream media down south.  There are still quite a few of the general public outside of north LA that have never heard of the Haynesville Play.  The reason for this production imbalance is that south Louisiana has no unconventional reservoir plays and the majority of production is oil and condensate with only marginal volumes of associated gas from shallow and largely depleted vertical wells. 

Whenever you hear the usual grumblings about severance taxes from industry, it is helpful to keep this fact in mind.  Only a small portion of state oil volumes are taxed as "Full Rate".  The vast majority of production, north and south, falls into the latter two categories:  "Incapable" and "stripper".  Personally I would be supportive of a reduction of the Full Rate as it is high compared to other oil producing states.  That would however not be a great help, although the industry would welcome it, because of the "Deep Well" incentive that allows operators to pay nothing in tax for 24 months or until the well recovers its cost to drill and complete.

OIL SEVERANCE TAX RATES 

1. Oil Full Rate STATUTORY CITATION: R.S. 47:633(7)(a)

12-1/2 % of its value at the time and place of severance.

It has not changed since 1974. For previous tax rate see Historical

Oil Severance Tax Rates page. 

2. Incapable Oil Rate STATUTORY CITATION: R.S. 47:633(7)(b)

6-1/4 % of its value. Oil produced from a well that is incapable of producing

an average of more than twenty-five barrels of oil per day during

the entire taxable month, and which also produces at least fifty percent

salt water per day. On multiple well leases all wells must meet the criteria

to be able to qualify for the exemption. 

3. Stripper Oil Rate STATUTORY CITATION: R.S. 47:633(7)(c)

3-1/8 % of its value. Oil produced from a well that is incapable of producing

an average of more than ten barrels of oil per day during the entire

taxable month.

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Permalink Reply by Steve P on April 9, 2020 at 9:19

on a related note, this week, I checked to see which, if any, companies are still permitting wells in DeSoto and Sabine.  CHK permitted 3 in DeSoto in the last few weeks.

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Permalink Reply by Skip Peel - Mineral Consultant on April 9, 2020 at 9:23

Did you notice anything unusual about those wells, Steve?

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Permalink Reply by Skip Peel - Mineral Consultant on April 9, 2020 at 10:16

There is something else different about these permits.

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Permalink Reply by Steve P on April 9, 2020 at 10:36

they weren't CULs.  didn't notice anything other than that.

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Permalink Reply by Skip Peel - Mineral Consultant on April 9, 2020 at 11:19

That's what I noticed also.  You know how long it has been since CHK permitted an alternate unit well that wasn't a CUL?  Summer 2015.  That along with Jay pointing out that three of the four recent permits are in units where CHK owns the surface and the mineral rights makes sense for a company struggling to stay afloat.  That forth permit may have other some extenuating circumstance.  It's not related to production volume so maybe a drilling commitment?

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Permalink Reply by John Denison on April 9, 2020 at 11:15

All three are listed as ALTs, does this mean they are going back to an existing well and/or pad?

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Permalink Reply by Skip Peel - Mineral Consultant on April 9, 2020 at 11:23

Nope.  The first well in a unit is the "unit well".  All other subsequent wells producing from that unit, whether a CUL or a "within unit lateral" well, would be designated as an alternate unit well.  I didn't check but they could very well be utilizing existing surface locations,  no need to go to the expense of building a new pad.

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