As excitement builds over the possibility of an economic AC play and the opportunity for some private mineral owners to receive an offer to lease, I think a note of caution is in order. The history of exploration and production, or more specifically the lack of production, in the parishes currently being targeted for leasing programs appears to lend a certain mind set to expectations. There is a common history among numerous land/mineral owners of multiple leases over decades of time with no successful production which, for some, leads to an over emphasis on the bonus dollar amount and less concerning the other lease terms.
It is worth noting that the prior history of largely vertical drilling and lack of technology specific to very challenging formations is not a good decision making model for what has become the new normal in the last ten years. If you are following the general technical advances across all basins and the success of the AC in Texas in particular, you ought to have an increased expectation that this time may be different for central LA. I strongly suggest that GHS members with significant size acreage ownership to get the assistance of a law firm experienced in negotiating O&G leases for land owners. It is still too early to fully know how this AC play will turn out (see the TMS) however if it does become economic, the lease bonus will soon be of less long term value than a larger royalty fraction. For those who have surface ownership there are very important terms beyond the bonus. If ignored those terms may create regrets for decades to come.
My general rule of thumb is: if the bonus payment for your signature on a O&G lease will make a significant difference in your financial security or rescue you from an immediate financial emergency, it's acceptable to place your emphasis on the bonus. If however you, and your family, have a measure of financial security and do not need a cash bonus for some compelling need, have patience and get some professional help. If this AC play is a bust, you may regret to some extent not taking a lease in time. If this AC play is a success, you will almost certainly get considerably better lease terms and the long term difference in royalty revenue could easily be many thousands (or hundreds of thousands) of dollars more than your bonus check.
Just noted that all of Saur's seismic options - which appear to overlap EOG's acreage outline of filed leases - are carrying 20% royalties when noted
They (EOG) have not mentioned this parish in their acreage position comments - only Avoyelles, St Landry and Pointe Coupee. The PDF attached (from DrillingInfo.com) shows areas in the these three parishes where EOG has leases on file in their name.
It appears that this is a "sub basin" that they have identified for the AC - there are a series of salt domes along the west side of this leased area that separate it from Evangeline Parish - this may be a critical issue in EOG's eyes as to AC prospectivity.
Thanks Rock Man that provides a pretty good outline of their area of interest.
What I notice is some areas that are not available for lease that are currently held by gas production.
John, at least in my experience, a mid-major or major energy company secures the assignment of deep rights from existing operators of shallower wells very early in their lease program and does not file those agreements in the public record until after they have completed their lease acquisition phase, if at all.
One of the reasons that smaller O&G companies go to great lengths to hold on to their leases is just such a windfall. Besides any cash payment they might receive, they usually hold older leases with lower royalty fractions which provide them with an override. With the possible exceptions of a few families with very large land holdings, the biggest winners in the Haynesville Shale land rush were operators with significant acreage held by long lived, shallow conventional reservoir production.
So based on your input Skip these areas could potentially have a sub-lease or a joint venture in production. The best leases I have seen specified a target area only or a better royalty for areas outside of the target area. I need to pull up an old oil and gas lease that is held by production to see how this would play in my area of interest.Thanks Skip for helping expand my knowledge.
thats impossible to answer at this moment. things are moving so fast we can only hope that EOG brings the experience to drill the AC deep.
and yes i have seen Kirks blog with EOG 3D areas... all east of ville platte and salt domes. who knows what will happen west of all that as that is where our position of offer is. there 3D shoot will be done by july 2018, maybe things become more apparent then... thanks for all post tonight... appreciate the input..
Those leasing their minerals as part of a seismic agreement may not be a good barometer of potential royalty terms.
I wonder what the companies leasing for AC in Vernon Parish think about the salt domes?
Re: Vernon Parish / Salt Domes
As for leasing in this area (there was no "reply" button under Skip's comment), I would think that avoiding them and their probable intense natural fracture network would be the approach to be taking. It is already difficult to frac the AC with some natural fractures while using diverter technology - having a much more intense fractured system may end up minimizing the ability to effectively "Frac" the AC rock and liberate the trapped O&G.
However, the approach here may be to optimize natural fractures in the AC and not try to stimulate the reservoir rocks (i.e. a more traditional AC play).
Also a very good point on the royalties associated with the seismic agreements.
Just my opinion on all this.
thanks RM,, for all your input tonight.
John, I doubt it would be a joint venture but a "sub-lease" will do. For those mineral owners who also own their surface, I always suggest that they consider a demand for their lease to be "released" (terminated) when production declines to the point that a well no longer meets the "production in paying quantities" test. That way a company like EOG might show up and offer them a new lease at modern terms. Those who own a mineral servitude (only the mineral rights, no surface ownership) have a more challenging decision to make. If a play is economic and ongoing in their vicinity, they might wish to make a demand. If not, they may benefit by sticking with their operator of marginal wells in keeping their servitude alive.