Replies to This Discussion

Permalink Reply by 1kw6x71km1v37 on July 28, 2014 at 9:37

Colquit Owner,

You need immediately to go here; SONRIS.COM and find the production records for the well. Click on DATA ACCESS, then WELL INFORMATION and scroll down to WELLS BY SERIAL NUMBER. This well tell you right quick if there is money in going UMI. Since the operator came to you with a proposal to do that, I suspect the production figures will be low. But for your sake, I hope the opposite is true.

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Permalink Reply by Skip Peel - Mineral Consultant on July 28, 2014 at 9:39

Better yet post the serial number or the well name with section-township-range and I'll see if the operator has filed for their tax exemption.  There is no way to know if a well has paid out by looking at production without knowing the cost.

Permalink Reply by Colquit Owner on July 28, 2014 at 9:52

thanks a lot.

the well serial no is  238491. . . . . .

I feel fortunate that now, having been declared the owner of our minerals, we have a choice:  move forward UMI, or sign a lease.

What would you do??

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Permalink Reply by Skip Peel - Mineral Consultant on July 28, 2014 at 10:27

The well cost was $10,237,134.  Production began 12/30/08 and the exemption stating payout was dated 4/20/09.  NG prices over that period went from $6.89 to $4.82 mcf.  You have Chesapeake for an operator and the well is largely depleted, both not good.  The rock in the area is not the best, probably Tier 2/Tier 3 but hard to know for sure as well drilling and completion designs have improved since that time.  There is only one unit well so there can be up to seven more and NG prices should improve incrementally over the coming months, both good.   Chesapeake is not drilling Tier 2 or 3 rock currently however the continued decline should make the well marginally economic to produce in the not too distant future.  Then Chesapeake will have to make a decision as production will be nearing the "production in paying quantities" standard.  I think they will drill.  Most probably Cross Unit Lateral wells. 

What I would do depends on my perceived leverage.  By that I mean the number of mineral acres.

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Permalink Reply by Colquit Owner on July 28, 2014 at 10:39

Skil,

You're wonderful; A fountain of info!!

The entity we are working with is BHP Billiton, who says they would be the ones to pay us, and they are offering to to execute a lease with us for $300 per acre bonus and .25%.

.  So, is Cheasapeake our "operator????"

We own 22 acres in that section 27.

What would you do?????

help

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Permalink Reply by Colquit Owner on July 28, 2014 at 10:48

Hey.  Just realize I gve you wrong serial number!!!!!!

it is 240477

S O R R Y !!!!!   

thanks,

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Permalink Reply by Skip Peel - Mineral Consultant on July 28, 2014 at 10:55

Okay.  Same rock, better company.  I'd hire an experienced O&G attorney to help negotiate a no cost royalty clause.  I'd give up a bonus to get it if I had to.  If BHP will not go for that I'd just make sure the other lease terms were acceptable, sign for 25% and $300/acre and hope that BHP starts drilling in the unit soon.

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Permalink Reply by Colquit Owner on July 28, 2014 at 11:02

thanks so much.

it seems you're saying that there's a fair chance of more drilling/expenses in the unit, which would deplete our immediate income. But, that would increase the income with a lease.

Yet, over the long haul, and a second well(s) being successful, we'd make more $$?

think they'll drill added wells there

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Permalink Reply by Skip Peel - Mineral Consultant on July 28, 2014 at 11:11

The well is largely depleted.  Forget this well.  What is important is the future wells.  Not just another (second) well but multiple new wells.  No way to know when they will be drilled but in the future when they are the price of NG is likely to be better.  Lease.  Get an experienced O&G attorney to help.

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Permalink Reply by Henry on July 28, 2014 at 12:15

I was in your shoes, sort of, a while back.  I'm a bit slow, and it took me a while to figure out that I had a small stake in a well that was already producing.  I called the company (BHP) to discuss it with them, and they agreed that my claim was valid.  They told me I could go UMO, or I could lease.  They were decent enough to write the lease so that they paid me for my share of the gas from first production.  You might ask your operator if they will do that, and pay you retroactively for all the gas produced to date.

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Permalink Reply by 1kw6x71km1v37 on July 28, 2014 at 13:34

Colquit Owner, On the face of it, just running some very approximate numbers, this could be one of many Haynesville Shale wells that may never reach payout. Therefore, you best recourse may be to take the lease offer and consider yourself lucky. Twenty-five percent along with a nice bonus to do nothing is, in the words of one of my attorneys, "Is really a pretty good deal."

A word of caution: any lease you sign should include a vertical Pugh Clause limiting the lessee to certain depths. You never know what else is down there. But they might. And I would recommend you sign with BH Billiton. It's such a cool name  compared to initials.

Best of luck to you.

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Permalink Reply by Colquit Owner on July 28, 2014 at 15:24

Thanks everyone.
Just a note: my well has already paid out. So I can sign a lease for future (from last March) production @ 0.25, or remain unleashed.

Apparently the consensus it for me to execute a lease.

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