SNAPSHOT OF THE PLAY: HA UNIT ORDERS/APPLICATIONS BY TOWNSHIP - 07/18/09

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Thanks to you both......Skip & Les
AJB. The HA units in your township are to your immediate west ( Section 19/30) and to your south - south/east (Sections 26-28, 33-35). These are all Samson Contour units. Samson applies for a lot of drilling & production units but doesn't drill many sections. They more often become Working Interest Owners (WIO) in wells drilled by other operators. As they hold these sections under unit order, they will have the ability to designate the operator. And it may be Chesapeake. No guarantee. The combination of Sections 19 and 30 in a single unit may have something to do with surface access as Section 19 is outside of and Section 30 is inside of the Barksdale Air Force Base reservation.
Skip,
Thanks for the update. Does it matter to the landowner who has the unit? Will it potentially slow down the drilling selection process.?
AJB. At this early point in the Play, the operator of an HA unit is quite important. Unfortunately, in most cases, who a lessor leases to has little influence on which company gets the unit order or which company ultimately becomes the operator. The operator of a conservation (compulsory) unit approved by the state may be the operator (drill the wells, develop the unit) or they may "designate" the unit operator. In the real world what we see is a unit order to a smaller, less capable operator initially which is followed later by a larger, more capable company applying for the same unit. The original unit operator vacates their order in favor of the subsequent unit applicant. Holding a HA unit order adds value to the leasehold position of the smaller operator. The best example of this business strategy in the HA Play is Samson Contour. They presently hold HA unit orders for ~ 110 sections but if you check SONRIS for their HA wells, they have about a half dozen. The last time I looked. But it is becoming more frequent that I see HA well permits in their unit/sections by other operators.
Skip,
why would Chesapeake pay top dollar to lease approximately 1/3 of Sec 20 and not apply for a HA unit? Especially, since Samson is beginning to surround them. Sorry another question. Does the operator who applies for the HA unit have to hold a majority of the leases in a section or just a single lease?

Many thanks
AJB. As illogical as it sounds, there is no requirement in LA. mineral statutes for a unit applicant to hold or control a majority of acres by lease in a section/unit. I have never asked your specific question of the attorney for the Louisiana Office of Conservation regarding holding a single lease. I would certainly hope so.
Skip, We are in 16N 8W. I noticed they are below us in the Woodward field and I think the Alabama Bend field. They are also in the township to the east of us in the Bistineau field. My question is part of the reason they are not in our area is because we are in a different field? Do the O&G companies tend to cover one field before moving on or is that just how it look?
landowner. The traditional concept of oil and gas fields really doesn't apply very well to the Haynesville Shale. The fields were established by the exploration for and production of oil and gas from "conventional" reservoirs. The HS is unconventional and covers large areas with no field designations. What is called "Wildcat" by the LA. Office of Conservation. It is helpful to keep in mind that many of the companies who are active in the HS had existing leasehold for the development of other formations (Hosston, Cotton Valley, Smackover and numerous other "sand plays"). In most cases they had "all depth" leases that were Held By Production. Except for some of the bigger shale players, many companies are simply developing land to which they held drilling rights. They did not participate in the lease rush. The pace of development has slowed for economic reasons and those, like yourself, who are on the edge of current activity may have to wait a little longer to see a HA well.
Skip, Thanks so much for explaining the fields to me. I think I have a better understanding now of oil and gas fields and the Haynesville Shale. I will just keep on letting the timber grow and have it cut for a few more years until we hear something.
Well Skip, I spoke a little too soon. We received a pre-application notice for the Jamestown field for Sections 20, 32 and 33 today.
Good news for you Landowner, who is the operator?
Landowner. Looks like it's your turn. You are up. This is a pre-conference notice letter for HA Drilling & Production Units in Sections 20,32 & 33 - 16N - 8W by what operator/applicant? These are the first HA unit applications in 16N - 8W and the Jamestown Field.

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