Twin cities no longer does group negotiations
Twin Cities confirms "no group negotiations" policy
Posted: Feb 24, 2009 11:11 PM CST
Updated: Feb 24, 2009 11:37 PM CST
KSLA News 12 Headlines More >>
SHREVEPORT, LA (KSLA) A major lease-broker in the Haynesville Shale confirms they will not be negotiating with groups anymore. It's not good news for many of the dozens of neighborhood organizations that have formed over the past several months in search of better lease terms.
Monday night KSLA News 12 reported that the East 80 Oil and Gas Leasing Coalition has run into a roadblock in their attempts to negotiate with Chesapeake Energy: they've been told the company's leasing broker, Twin Cities Development, will only deal with individuals.
We asked Twin Cities today about that, and the Director of Community Affairs Clay Baskin confirmed it. "It's our new policy for 2009, and what we are doing is, we're giving the individual lessor the opportunity to negotiate on their own behalf for their own oil & gas mineral lease." Baskin says the new policy is in response to problems they've encountered in dealing with large groups, "Past experience hasn't turned out to be as productive as we had hoped. And also whenever you have the spillover of the acreage that's not contiguous to the section that we're focusing on, then it's in effect at that particular time not acreage that we're interested in because, A, we don't have a drill site, B, there might not be pipeline access at that current moment."
As the market has slowed, Baskin says, the focus for leasing has turned from grabbing up as much leasehold to what he calls 'controlled development.' "We have the same manpower, it's just much more controlled and much more focused. So yeah, for individuals living in sections where we have drill sites and we have pipeline access, you're going to see that activity begin to pick up."
"So what we want to do is focus on section by section, and as I said before, 'controlled development,' and then move forward from one section to another as opposed to taking on maybe 4, 5, 6 or several different ranges as opposed to taking on whatever we can't develop all over, " Baskin explains. "What we have to do is we have to put them together and we have to turn them over so that Chesapeake can start drilling and see a return on their investment."
Chesapeake Energy Corporation (NYSE: CHK) currently claims 460,000 net acres of leasehold in the Haynesville Shale. About 110,000 of that is in a joint venture with Plains Exploration and Production Company (NYSE: PXP).
In addition to lower bonus offers, Baskin says Twin Cities' lease terms in recent offers are now longer. "The primary term (is) generally on a 5 plus 5 basis. And once again it has to do with the fact that if you take into account that the intricate parts of putting together an urban environment such as Shreveport and Bossier City, you need that extra time in order to fulfill your committment, not only to us to our operating parter Chesapeake, but also to the individual lessor. If you sign a lease with a lessor, you expect to have your minerals produced. But in effect, whenever we deal with so many people and so many landowners, it takes us longer over here in an urban environment to put that together. "
In other words, the longer lease terms give Chesapeake more time to develop all the acreage they've been leasing up. So what's in it for the landowner looking at signing a five year mineral lease? Who's to say natural gas prices - and therefore mineral acreage values - won't go up again in a few years? "That's exactly what it is," says Baskin, "Who knows?' And that's what we want to project to people is, first thing, we want to educate them. Second thing we want to do is give them the opportunity. What everybody has to understand is that they have the opportunity to wait. Or they have the opportunity to sign. "
Or be force-pooled. This happens when a majority of mineral owners in a unit (640 acres, or about one square mile) have agreed to lease their minerals. The operator can ask the Department of Natural Resources' Department of Conservation to "force pool" the remaining un-signed mineral owners so that the well can be drilled. Since they haven't signed a lease, force-pooled mineral owners do not receive a per-acre bonus and will get not get paid until the cost of the well has been recovered by the operator. For example, if you own 32 acres in a 640-acre unit, you would responsible for 5% of the well cost. These deep wells into the Haynesville Shale have typically cost anywhere from $5-8 million each to drill. After that, however, you would receive your full proportionate share of the revenues, ie., 100% royalty on your share of the unit. That could mean big returns - if the well is successful. The downside: if the well never breaks even, force-pooled mineral owners won't see a dime.
Baskin says forced pooling has to become economically feasible for the producing company to do so, but that decision is up to Chesapeake. "A lot of people ask me, 'When will you stop leasing?' Well, we won't stop leasing until there's 100% or until we effectively cannot lease anymore acreage and then if it is economical to go ahead and produce the well and go ahead with force pooling that's Chesapeake's call and they go forward with that process."
Buck
Posted: Feb 24, 2009 11:11 PM CST
Updated: Feb 24, 2009 11:37 PM CST
KSLA News 12 Headlines More >>
SHREVEPORT, LA (KSLA) A major lease-broker in the Haynesville Shale confirms they will not be negotiating with groups anymore. It's not good news for many of the dozens of neighborhood organizations that have formed over the past several months in search of better lease terms.
Monday night KSLA News 12 reported that the East 80 Oil and Gas Leasing Coalition has run into a roadblock in their attempts to negotiate with Chesapeake Energy: they've been told the company's leasing broker, Twin Cities Development, will only deal with individuals.
We asked Twin Cities today about that, and the Director of Community Affairs Clay Baskin confirmed it. "It's our new policy for 2009, and what we are doing is, we're giving the individual lessor the opportunity to negotiate on their own behalf for their own oil & gas mineral lease." Baskin says the new policy is in response to problems they've encountered in dealing with large groups, "Past experience hasn't turned out to be as productive as we had hoped. And also whenever you have the spillover of the acreage that's not contiguous to the section that we're focusing on, then it's in effect at that particular time not acreage that we're interested in because, A, we don't have a drill site, B, there might not be pipeline access at that current moment."
As the market has slowed, Baskin says, the focus for leasing has turned from grabbing up as much leasehold to what he calls 'controlled development.' "We have the same manpower, it's just much more controlled and much more focused. So yeah, for individuals living in sections where we have drill sites and we have pipeline access, you're going to see that activity begin to pick up."
"So what we want to do is focus on section by section, and as I said before, 'controlled development,' and then move forward from one section to another as opposed to taking on maybe 4, 5, 6 or several different ranges as opposed to taking on whatever we can't develop all over, " Baskin explains. "What we have to do is we have to put them together and we have to turn them over so that Chesapeake can start drilling and see a return on their investment."
Chesapeake Energy Corporation (NYSE: CHK) currently claims 460,000 net acres of leasehold in the Haynesville Shale. About 110,000 of that is in a joint venture with Plains Exploration and Production Company (NYSE: PXP).
In addition to lower bonus offers, Baskin says Twin Cities' lease terms in recent offers are now longer. "The primary term (is) generally on a 5 plus 5 basis. And once again it has to do with the fact that if you take into account that the intricate parts of putting together an urban environment such as Shreveport and Bossier City, you need that extra time in order to fulfill your committment, not only to us to our operating parter Chesapeake, but also to the individual lessor. If you sign a lease with a lessor, you expect to have your minerals produced. But in effect, whenever we deal with so many people and so many landowners, it takes us longer over here in an urban environment to put that together. "
In other words, the longer lease terms give Chesapeake more time to develop all the acreage they've been leasing up. So what's in it for the landowner looking at signing a five year mineral lease? Who's to say natural gas prices - and therefore mineral acreage values - won't go up again in a few years? "That's exactly what it is," says Baskin, "Who knows?' And that's what we want to project to people is, first thing, we want to educate them. Second thing we want to do is give them the opportunity. What everybody has to understand is that they have the opportunity to wait. Or they have the opportunity to sign. "
Or be force-pooled. This happens when a majority of mineral owners in a unit (640 acres, or about one square mile) have agreed to lease their minerals. The operator can ask the Department of Natural Resources' Department of Conservation to "force pool" the remaining un-signed mineral owners so that the well can be drilled. Since they haven't signed a lease, force-pooled mineral owners do not receive a per-acre bonus and will get not get paid until the cost of the well has been recovered by the operator. For example, if you own 32 acres in a 640-acre unit, you would responsible for 5% of the well cost. These deep wells into the Haynesville Shale have typically cost anywhere from $5-8 million each to drill. After that, however, you would receive your full proportionate share of the revenues, ie., 100% royalty on your share of the unit. That could mean big returns - if the well is successful. The downside: if the well never breaks even, force-pooled mineral owners won't see a dime.
Baskin says forced pooling has to become economically feasible for the producing company to do so, but that decision is up to Chesapeake. "A lot of people ask me, 'When will you stop leasing?' Well, we won't stop leasing until there's 100% or until we effectively cannot lease anymore acreage and then if it is economical to go ahead and produce the well and go ahead with force pooling that's Chesapeake's call and they go forward with that process."
Buck
Views: 263
Replies to This Discussion
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Permalink Reply by Two Dogs, Pirate on -
Hey, KB who would you feel more comfortable with CHK of HK, as to who can drill a better producing well?
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Permalink Reply by Two Dogs, Pirate on
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Thanks KB, just feeling out the turf.
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Permalink Reply by getoverit on -
I agree with KB. We have leased 1 of our sections with HK and another with CHK, and I would have much rather have leased both our sections to HK. HK is currently trying to form a unit in the section we leased to them last May, and CHK is currently trying to form a unit in the section we leased to them just recently. Wish that both were going to be HK wells, but we can't win them all. =)
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Permalink Reply by Two Dogs, Pirate on
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Thanks for your feedback getoverit.
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Permalink Reply by Tara on
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If the companies knew about the Haynesville Shale "years ago," why on earth wouldn't they have put all 20+ rigs in the field to drill it THEN, when gas was $10-$13, instead of today's $3+?
The argument that the companies have been slow-playing people with all this "secret" knowledge seems pretty thin when you look at the fact that almost the ENTIRETY of the Haynesville gas will be sold for 4 times less than it was worth when the play was discovered.
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Permalink Reply by Dtown on
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"From what you remember" seems to be a little off. Do at least "some" research, bring some facts to the table, then we can talk. You are way off if you think last year was the first year prices jumped in this industry (i.e. natural gas wellhead prices).
You're also wrong about your technology comment. How about you check to see how long ago horizontal drilling in shale rock began, in the Barnett Shale area for example. (Newsflash!!!! Didn't just start last year honey) Trust me, if these companies would have known about the HA shale and how to sucessfully complete a well in the shale (high pressure environment), they would've been here a long time ago. They've been drilling and completing wells in the Barnett Shale for several years now, when prices where much higher /MMbtu.
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Permalink Reply by Cathaus on
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Dtown,
You are messing with the wrong woman when you go up against KB. She has irrefutable data to back up her statement. The honey remark was very condescending and I resented it right along with her. You will find out quickly if you continue trolling this site that KB will take you down. Oh Oh, sounds like you won't have far to fall!! -
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Permalink Reply by Dtown on
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BZZZZZ!
Of course they knew shale rock was there! Great for USGS, the Aggie rock doctors and anyone else that could read a log from a well drilled deep enough to see a shale rock formation. So did hundreds of other companies for years! If you drill a verical well deep enough you will cut through the shale and any other rock if your drill bit will hold up. The problem is none of those companies until 8 - 10 years ago knew you could produce any hydrocarbon from it (i.e. rock). Once these companies (i.e. Mitchell Energy, Devon Energy, Chesapeake etc.) determined gas was actually present in this shale, they then spent millions upon millions developing completion techniques that would provide for productive wells produced from shale. This of course has been perfected in recent years but all was well before last year. If it were 2004, your technology argument would hold water, unfortunately for you it's 2009.
By the way, you need to look in more detail at the "averages" you've posted earlier. HH spot "average" prices have been well above what you listed earlier and your range is off too including 2007, which for the lower 48 was almost $7/MMBTU. Again, these are averages therefore at different times prices escalated well above $10/MMBTU. -
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Permalink Reply by Cathaus on
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I am glad that arocept works for you. It was a complete failure on me. My geriatric said that I was too far gone. He gave me prozac. I can't remember squat, but I don't even care!!!!!!!!!
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Permalink Reply by Eric S. Clarke on
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Prices according to the US DEPT OF ENERGY FROM 1973 up through 2008 well lets just say that 2008 was the only year that they were that high for more than a month at the well head prices.
http://tonto.eia.doe.gov/dnav/ng/hist/n9190us3m.htm
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Permalink Reply by Cathaus on
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I would never willingly do business with someone that has no regard for my business.
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Permalink Reply by RONNY on
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Tell Twin Cities to call ya back when the recession is over. Once gas gets back up around $10 per thousand these jacklegs will be foamin' at the mouth again. Everybody just be patient and for crying out loud don't EVER, NEVER, EVER, NEVER!!!!!!! never sign a lease for 5 years with a 5 year option!!!!!!!!!!! JMO
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