Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on June 9, 2009 at 6:23

Jaime. Though Matador does not possess significant horizontal completion experience, it appears that their wells in north Caddo were joint ventures with Chesapeake. As has been mentioned numerous times by landowners in the area, Matador's well sites had more Chesapeake trucks on them than Matador vehicles. That being said, Chesapeake is not immune to mechanical drilling and completion problems. Considering the disappointing well results to date, there is no reason to complete any well already drilled but not completed. There may be something to the rumor concerning conversion to a SWD (salt water disposal) well. The current status is 27 (Abandoned SWD - Not Plugged).

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Permalink Reply by Jaime T on June 9, 2009 at 7:14

Skip, I agree with you. Between the current price of natural gas and the dismal results of the North Caddo Matador wells, I don't see the profit considering the cost of drilling a problem well. The well in Sec. 21, just south of the Lanier 16, used to be a Matador operated well but now has a Chesapeake sign at the entrance.

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Permalink Reply by Les Bamburg on June 9, 2009 at 8:12

Jaime, the following vertical well was drilled and completed by Chesapeake:

Chesapeake, Lona M Johnson 21 #1 Well, Serial #233555, S21-T19N-R15W

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Permalink Reply by Spring Branch,mineral owner on June 9, 2009 at 21:01

The Lona Johnson well is part of the joint venture between Chesapeake and Goodrich. An attempt was made to extend the lease for a certain $ amount and the mineral owners wanted more $ than was being offered, as they knew the lease was about to expire. Chesapeake/Goodrich moved a rig in, drilled out the Cotton Valley bore hole and extended the depth to the Haynesville as a vertical; hence it's now HBP. Goodrich offered the mineral owner $200,000, he demanded $400,000, and wound up with ZERO.
Check/Checkmate.

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Permalink Reply by Spring Branch,mineral owner on June 10, 2009 at 8:59

KB, if you are following the play, you realize that it is not particularly true in 19/15. Personally, I'd like to have the $200,000 and the royalty income.

The problems with rules of thumb is they don't always work. In this case there probably won't be royalty or lease bonus. Remember location matters.

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Permalink Reply by Grillin' - MmmMmm on June 10, 2009 at 1:32

I hadn't heard this but I think you'll see more of this as some of the "cheap leases" get close to expiration date. The companies will make offers for new leases at low rates and other companies will be out "top leasing", so most companies will go out and drill a cheap producer to hold the acreage. Many will cry "foul" but all within the letter of the lease contract.

You've got a tough decision if you're offered $1500/acre just before expiration and there's a rig waiting to drill that vertical well. Could you get more? probably but the upper hand may be with the guy with the old lease. But I don't think they can drill a boat load of these vertical wells. Cost/benefits just not there, even if you include the loss of the lease or the cost to re-lease at high prices. These will be done in areas with promise, not out in the hinter lands.

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Permalink Reply by Spring Branch,mineral owner on June 9, 2009 at 20:43

Skip, It is my opinion that Matador's joint venture in Caddo Pine Island is/was with Goodrich, rather than Chesapeake. There is a joint venture in the area between Chesapeake and Goodrich and also between Matador and Goodrich. I am not certain if there has, in fact, been a joint operating agreement in the area between Chesapeake and Matador.

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Permalink Reply by Skip Peel - Mineral Consultant on June 10, 2009 at 2:23

SB. I was aware of the Chesapeake - Goodrich connection. My suspicions concerning Chesapeake - Matador had to do with the numerous mentions of Chesapeake employees and equipment on Matador well sites. A joint venture relationship just seemed to be a logical reason to explain those observations. You may be right. I was thinking Chesapeake-Goodrich in Longwood and Chesapeake-Matador in Caddo Pine Island. Unfortunately speculation on those relationships may be a moot point as activity seems to have come to a halt in the area. I am seeing no current leasing in the 19N townships and a small amount representing small tracts, mostly residential, in the 18N townships by Twin Cities.

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Permalink Reply by Skip Peel - Mineral Consultant on June 10, 2009 at 2:41

KB. I don't know about "other deals in the works". I do know that well permits are being allowed to expire and that there is no visible top leasing in progress at this time. If memory serves, many of the leases in the area are expiring or will expire in the next 6 to 12 months. I just don't know if this analysis indicates the results of the general decline in investment for leasehold or a decision to abandon the general area based on well results to date.

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Permalink Reply by Buddy on June 10, 2009 at 10:07

Spring Branch and Skip: Matador and Chesapeake also have a relationship in south Caddo/north Red River - Matador has CV and Chesapeake has the Hay.

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Permalink Reply by Skip Peel - Mineral Consultant on June 10, 2009 at 10:18

Thanks, Buddy. It's difficult to keep up with the relationships between operators. And they can be different in different areas of the play. Many members would be surprised how few wells are owned 100% by one company. The vast majority of HA wells have one or more working interest owners. Quite often those WIOs are other operating companies. I have been under the impression, correct or not, that Chesapeake was lending their drilling and completion expertise to numerous wells in the names of other operators in north Caddo. I would not be surprised to see similar relationships in many parts of the play.

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Permalink Reply by Buddy on June 10, 2009 at 10:23

I forget if it is Spring Branch or Les B who gets giddy when something good happens down north Red River Parish way. From what I am hearing, they are gonna be pretty much on cloud 9 again when news leaks out.

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