Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on Tuesday

Lisa, if someone is in a financial bind and the bonus to sign a lease could solve that problem that would be the only scenario where leasing now would be a reasonable decision.  Texas is a good bit behind Arkansas as far as knowing how royalty will be structured but we should know how that works out before Texas gets there.  Until Texas comes up with development regulations and royalty structure, leasing now is like rolling dice.  Is there a risk for waiting?  Possibly. 

Lithium development will be located in areas where the concentration of lithium in the SMK brine is high and there is a sufficient quantity of brine for a processing facility.  Right now there is little public knowledge of where those areas may be located.  Lithium companies and speculators are trying to generate the data required to locate those areas but will not be making that public knowledge.  Right now companies are leasing with little hard data to go by and for that reason they are offering terms that recognize the risk that they may lease areas that turn out to be less than ideal.   In other words, very low terms for the land owner.  Those that wait and end up in a sweet spot for lithium development should be able to negotiate a favorable lease.  Those that  do not may see the opportunity to lease go away.  This play will be like historic oil and gas exploration in that productive areas may be limited in size and that areas not far away may not be economic.  The same way the oil business used to drill 4 or 5 dry holes for every well that was commercial.  That's my best guess as to how things will unfold at this time.

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Permalink Reply by Lisa on Tuesday

Very helpful! Thank you!

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Permalink Reply by Skip Peel - Mineral Consultant on Tuesday

You're welcome, Lisa.  I hope there are few landowners in your county that would feel the need to take a low ball offer for their short term financial needs.

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Permalink Reply by phoenix on Wednesday

Skip,

Does anyone have any projections as to what a moderate and/or a good lithium well would produce initially, decline projections, price received and an estimate as to dollar amount per acre a royalty might receive.  A lot of variables here but just some ball park figure as the bonus amounts being offered are not very attractive only incentive I see is production or possibly finding new oil and gas pays during their drilling.

Thanks

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Permalink Reply by Skip Peel - Mineral Consultant on Thursday

phoenix, we're too short of specifics at this point to speculate about per well production and royalty revenue.  I do expect that the wells will be unitized meaning that regardless of location all mineral interests in the unit will share in gross revenue production.  So if you own 70 acres in a 700 acre drilling & production unit you would receive revenue based on 10% of cumulative unit production times your royalty fraction less any post production deductions for transportation and treating.  In a rather limited common pool, I would expect all the wells to have similar flow dynamics.  I expect the lithium brine play to be unlike unconventional reservoir production like the Haynesville Shale and very similar to the historic conventional production of the last hundred or so years.  I expect that the sweet spots for brine in the Smackover will have reasonably high porosity and permeability.  Once they cease to flow from formation pressure, the wells will be put on some type of lift system.  The actual field design for wells and pipeline systems have not been discussed in any articles or reports that I have read.

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