My First ULMI check!

I need help. I am on the verge of going unleased, Chesapeake is surveying the well site for a Haynesville well in our section as we speak. I have spoken with a oil and gas attorney, I have read online until my eyes have crossed, I know the pro's,cons and details of going ulmi but I cannot find any one who has went unleased and has started recieving the big money (100% royalty). I am curious to here from someone who can validate things such as the operating cost, if you got the runaround or any info that they can share about going unleased. There are people everywhere that say "do not lease" and I agree, but I am turning down 8,000 an acre with 25% royalty and I am actually having to put my money where my mouth is. Can someone that has or that knows anyone that has gone ulmi and has been successful please give me some insight on how the process went for them. Thanks again for any help that can be given.

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Permalink Reply by adubu on October 9, 2009 at 6:19
jason--correction it is the Hassel #3H that they left 330' segment of lateral unperf due to no lease
Permalink Reply by jason on October 9, 2009 at 6:31
Gotcha, Thanks again
Permalink Reply by P.G. on October 9, 2009 at 3:12
At these cheap gas prices, wouldn't it take a long time to pay off the expenses of a well?
Permalink Reply by jason on October 9, 2009 at 4:31
It would take longer, and that is one of our concerns. Even though we are getting a more than fair bonus offer for this market when we run the numbers on $4 dollar gas and a initial decline rate of 85% and 10 million cost to drill the well. IF and a big IF everything goes well then it would mean an additional 1million dollars over the life of the well. If it takes 8 wells to drain a section, that is a substantial difference. I am just trting to find someone out there that has gone unleased and can give us advice on what to expect. I trust my attorney but I still would like to talk to as many people as I can to educate my self further.
Permalink Reply by Randy on October 9, 2009 at 4:39
Yes, the decline curve would hit him before he got money out of it. I'd get another opinion (just like he is doing here), except it would be from another qualified O&G attorney. And I'd ask the same questions.
Permalink Reply by Grillin' - MmmMmm on October 9, 2009 at 4:42
At $3/mcf, minus $1/mcf for operating expenses, gets you to $2/mcf. If the well is a 10 MMCF/day well average, that gets you to $600,000 per month for the payout account on an 8/8ths basis (gross). The well should come in much higher than that but will fall off as well. I'm guessing over 1 year payout, but when it does it will be fun. More sophisticated calc's can be done if I have some time.
Permalink Reply by jason on October 9, 2009 at 5:46
We hope so. Our calculations are similar as well.
Permalink Reply by Randy on October 9, 2009 at 5:52
That's real rough guesstimation Mark. While I hope to see people get ~60% on a UMI basis, I haven't seen any UMI checks either.

What do you think the mmcf/day average will be after a year (or more)? I'm not sure I believe it'll be 10mmcf/day still at that point.

I guess time will tell.
Permalink Reply by Grillin' - MmmMmm on October 9, 2009 at 6:13
I'm not sure the 10 MMCF/day average is even good for the first year! It was just something easy to multiply! There's some good data out there that I can't get to right now that has the decline curves broken down into yearly production numbers. I'll get them when I get back to this.
Permalink Reply by jason on October 9, 2009 at 6:56
Mark, Is the one dollar figure that you used above just a ballpark figure? We are also curious if anyone knows what percentage of the revenue goes to operating cost after payout of our portion of the well. For example if the unleased revenue that we recieve for a month is 10,000 how much would they hold out for operating expenses. We have read over the La statute that explains what they can deduct but we are curious if anyone knows a general percentage for the amount. Thanks again for all of your info.
Permalink Reply by Randy on October 9, 2009 at 7:09
Jason, please, spend the money to have another O&G attorney look over what you want to do. They need to have at minimum 5 years in O&G work, preferably 10 or more.

You need more information than what you have, and you need it from a competent source who is legally qualified to give you advice.

Saying that, please take my advice and get more advice.
Permalink Reply by The_Baron on October 9, 2009 at 8:00
listen to Randy.

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