Oil found below the Haynesville.

Is a Smackover Rush Coming?

Wouldn't it be nice if there were a "liquids rich" play below the Haynesville Shale?  The Smackover formation, which underlies the Haynesville in northern Louisiana and southern Arkansas, has been known of for a long time but drilling it was not considered economical.  But technology has advanced over the past decade and some are thinking the Smackover might be the next big oil play.  An analyst with Jefferies & Co. is now predicting as much.

That would be pretty sweet.  The Haynesville has largely been shunned in investor circles for its dry gas.  It's not that I need the attention, but another round of leasing sure would be fun.  Since the Smackover lies below the Haynesville and most leases have a vertical Pugh clause that only doesn't allow a lessee to drill below their established production, new leases would be in order for most landowners.  Can't you see it?  We can right the  wrongs of the past or get another bite of the golden apple.

A couple of weeks ago, I  noticed a Smackover completion in Webster Parish, (serial #241685).  But it might be best to sit and wait to see how things go before rushing out to buy that brand new Cadillac.  Everyone is looking for the next oil/liquids play and investment analysts love to be the first ones to make a call.  Unfortunately, they are not always right.  Let's hope this guy is...

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Permalink Reply by Linda Whatley on February 2, 2011 at 10:07
Geez, that's a lot of folks.  If the property is in Louisiana, the person(s) living there could just do a partition by licitation (spelling?), and buy the others out!!!  Then again, that would be an awful lot of people to have to contact.   Or, they could not pay the taxes, and buy it for themselves when it goes to tax sale.  In three years it would be theirs!  Of course they might have to deal with someone else bidding against them at the tax sale.  In that case they'd just pay the delinquent taxes, and wait another year to try and buy it!......  That's the way a lot of folks got clear title to property many years back.   

landownerPermalink Reply by Mac Davis on February 2, 2011 at 13:01

In terms of the idea of going through a tax sale, doesn't the state steal the minerals when there is a tax sale? 

 

For that matter, I don't think severed mineral rights are affected when the surface rights are sold, even through a tax sale.


Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on February 2, 2011 at 10:08
Max, I've got one on my desk right now with 35 heirs.  If that's not a personal record, it's close.  1200?!  Really, that's wild.  In such cases the best approach may be to establish ownership through use by the family member paying the taxes and then have him/her recognize the ownership interests of all the heirs.  The other heirs can execute quit claim deeds upon receipt of their proportional share of a sales price.  IMO, there will be a large number of individuals who have undocumented, undivided interests in HS minerals that will not receive any royalty payments from an operator until some legal action is taken on their part to clear the public record.  The operator will place royalties in a suspense account and then make the ownership interests go to court to create a merchantable title.
Permalink Reply by Linda Whatley on February 2, 2011 at 10:27
I agree, that is wild Skip!!  It got me to thinking how my mineral ownership could be diluted in just a few generations.  I have three daughters by my first marriage, two of them have two children each, and my oldest has four.  That's eight grandchildren who will inherit from my children one day, and no telling how many children my grandchildren will have.  It could be a nightmare for future generations!                 

Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on February 2, 2011 at 10:46
Linda, as I do research in the public records I see more and more instances of our generation forming family trusts and LLC's to address the obvious concerns of managing valuable family assets for future generations.
Permalink Reply by Linda Whatley on February 2, 2011 at 11:02
Thanks for reminding me Skip.  I'd been thinking about doing that for some time, but just hadn't gotten around to it. 
Permalink Reply by Parkdota on February 2, 2011 at 13:09
Linda, I just finished a testamentory trust and it was a real eye opener.  It will make you think about a plethora of things both present and future.  I strongly recommend you and all others with assetts set up one.  It's not so much for you/us but for others after you/us.  The trust management will advise you on many aspects that will ensure you are doing things the way you believe they should be done.  They also are experts with regards to taxes.  They don't charge a dime for consultation if you are interested.
Permalink Reply by Linda Whatley on February 2, 2011 at 16:47
Thanks Parkdota.  I'll have to look into that. 

landownerPermalink Reply by Mac Davis on February 2, 2011 at 17:13

Be careful on trusts.

 

Lots of folks are pushing the idea of trusts as a cure all for all your problems.  They can be a good thing, but they're not the right answer for everyone, and they need to be done right, or they can make the situation worse.


landownerPermalink Reply by essay on February 2, 2011 at 18:23
Linda I've heard LLC's electing s-corp status is the way to go.  YMMV.

landownerPermalink Reply by Max on February 2, 2011 at 10:45

Thanks Skip and Linda, but I backed out after the feud started. 

 

Some of the heirs were living in California and after being contacted by my attorney, they thought they owned a ranch.  For some reason, 80 acres is a lot bigger in California than here.  

 

The heirs living on the property offered me some good advice, "I don't like looking at you, maybe you need to get back in your truck and leave".  I did.

 

I got a call from my attorney several weeks later and he had some good advice also, "Don't try to straighten out the business of folk's that don't want it straightened out".

 

I bet they're still at it today, most of the one's living there have passed on, and the property looks like it did 20 years ago.

 

I may ride over and see if they want to sell.....


Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on February 2, 2011 at 10:56
Let's see, Max.  80 acres divided by 1200 = 0.066 acres per heir.  Actually some of the older members may have had almost a full acre.  You'd only have to get 100 of them to agree and then you would have .......eh, 7 acres!  I'm with your attorney on this one.  LOL! Now I think we should allow this discussion to return to it's focus on the Smackover Rush. My apologies to tony and North LA for going down this road so far with you and Linda.

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