Replies to This Discussion

Permalink Reply by Joe Aldridge on June 7, 2013 at 1:06

John,

That is not correct. LA allows a severance tax reduction on wells drilled below 15,000 ft. or that have a lateral component. That drops the tax on these wells 12.5 percent for the first two years of production or until the well pays out which ever comes first. MS is just coming up with something that is even in the same ballpark. And TD is correct. The title to minerals in MS is another problem. The mineral prescription does not expire after 10 years of non use. So the minerals can be held in perpetuity. That means that the title to minerals goes back multiple generations. Title search is a nightmare. So Its really not taxes its the ability to produce that is the problem. 

Permalink Reply by John Matherne on June 7, 2013 at 1:35

http://msbusiness.com/blog/2013/05/17/fervor-grows-for-tuscaloosa-m...

Mississippi legislators revved up the enthusiasm of Goodrich Petroleum and counterparts such as Canada-based Encana in this year’s session with a severance tax cut that drops the levy on oil and gas extractions by 80 percent.

Goodrich Petroleum says the drop in tax payments on oil and liquid gas extracted from its wells will further enhance a bottom line that has been helped by the company’s progress in lowering the per-well cost to around $13 million.

Walter Goodrich called the severance tax reduction from 6 percent to 1.3 percent for the next five years “a very significant improvement in the economics of the early-time wells.”

In the earnings a report, Goodrich emphasized to investors that Mississippi “is very much focused on the Tuscaloosa Marine Shale, very much hoping and expecting it to become a full-fledged play with lots of activity that can bring business in and, in particular, jobs back to the state of Mississippi.”

Encana estimates the 80 percent state tax cut will save it $700,000 to $800,000 “of additional cash flow” for each well it puts into operation after July 1. Encana has six deep ground horizontal wells in the TMS and plans two more in the current quarter, though presumably the company would delay the new wells in order to qualify for the reduction in severance taxes.

“This five-year program supports the pursuit of commerciality by positively impacting Encana’s economics for the emerging Tuscaloosa Marine Shale play,” said the company created through the merger of PanCanadian Energy Corp. and Alberta Energy Co. Ltd. in 2002.

Encana and Goodrich are among a handful of companies already working the deep horizontal wells in the 2.7 million acre TMS. Also active in the region are Devon Energy Corp. of Oklahoma City, Denbury Resources of Plano, Texas; Indgo Minerals and EOG Resources, both of Houston.

Drilling of each deep well so far has run from $11 million to $20 million.

Encana — which led the pack with 290,000 acres leased in Mississippi midway through 2012 — has decreased its drilling costs from around $20 million to $17 million a well, said spokesman Doug Hock. That cost is expected to go even lower, he added.

“We’re budgeting an average cost of approximately $15 million per well for the year,” he said. “This is related to technical changes and gaining an understanding of how to most efficiently access the resource.”

Encana is “gaining confidence in the potential of the play as it nears commerciality,” the company said in its first quarter earnings report.

The state tax cut applies to oil and gas extracted from horizontally drilled wells for a period of 30 months or until the payout of the well, a term used to mean that the oil and gas drilled by the well equals the cost of the well. The legislation applies to all qualified horizontally drilled wells between July 1, 2013 and June 30, 2018

Permalink Reply by david crocket on June 7, 2013 at 4:53

kirk barrel has a new post on his blog about a couple of new units in mississippi drilling into austin chalk. 06/07

Permalink Reply by Craig Wascom on June 6, 2013 at 16:15

I feel your pain.Three generations of leases and very little oil for us as well.

Permalink Reply by Joe Aldridge on June 7, 2013 at 1:16

Chip,

The point is we know the oil is there. The problem as you put it is these companies are trying to use the "new" techniques and technology to produce a formation that does not need them. Fracking or gravel/sand packing were first used on limestone/chalk formations 50 years ago. That technique seems to have been lost. Don't know or understand why and until someone comes in and does a well with a "slick water" frack we are "up the creek" with no paddle or rudder. But the oil is there.

Permalink Reply by William C. Morrison on June 7, 2013 at 3:29

Read about "slick water" fracking in the Permian Basin, opening up new strata and literally renewing the oil industry in Midland/Odessa.   Just somebody trying something new and it worked.  The fellow got rep credit but not a lot of money out of it.  He is satisfied and that is what counts for him.  But because of him millions of dollars are being made in west Texas again.

Joe, I appreciate your confidence in there being oil present.  We know there is gas down deep as the place was in production for a while in the early 1980's.  Years ago, a vertical well was drilled on Sugarland Plantation (Joe Beaud, etal) about a three quarters of a mile from us and it was a dry hole.  I am not sure how deep it went.  Today there is a "sweetening plant" on the back of Sugarland Plantation and Moore-Sams gas flows through it. 

I doubt that a production company would leave a sweetening plant in place unless there was future utility.  So that is hopeful.  Oil is a different story, a different strata, and appears to be a different way to extract it.  So far we do not have any definitive answers,or at least the production companies do not have a definitive answers on how to get it out.

Permalink Reply by William C. Morrison on February 3, 2014 at 5:53

Wake up!  What is going on with the lease frontier?  All quiet on the Pointe Coupee Coast.  I note our lease with Basin (aka Anadarko) expires on July 20, 2014.  Suspect things will be quiet for a while until something happens up in West Feleciana.  Then the interest will rekindle again.  Until then, we wait.

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