Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on June 10, 2009 at 17:10

Mattie. The accuracy of the maps, all the maps, are somewhat suspect at this time. Some areas have more data as they have wells drilled to the proper depths and modern logs. Other areas do not. As has been stated a number of times on the site, many maps are sales tools and wherever that company has significant leasehold, that's the "sweet spot" on their map. My comment about the northeastern edge of the HA play (western Bossier, southern Webster and northern Bienville) is not related to the prospective nature of the area so much as a recognition that it is the most active "edge" of the HA play at this time. Leasing, unit applications, pipeline construction, etc. The next stage will be the first wave of wells by several different operators. In another 3 to 4 months, we'll know more. I do not track TX. activity to any great extent. There seems to be a number of plays covering a wide area extending into central Texas. Shale plays are of the greatest interest to me and recent reports seem to indicate that the HA Shale does not extend as far into E. TX. as originally thought. The Bossier Shale in NW. LA. is getting some attention because it underlies much of the same leasehold that is prospective for the HA Shale. The Bossier is generally considered the "source rock" for the Cotton Valley formation. I guess the unrecognized benefit of the HA play is that it has revealed other potentially productive formations at shallower depths. That bodes well for many years worth of production and economic impact.

Permalink Reply by Les Bamburg on June 10, 2009 at 17:37

Skip, actually I would say the Haynesville/Bossier Shale trend may extend much further southwest into Texas than anyone (other than EnCana) suspected.

Permalink Reply by Les Bamburg on June 10, 2009 at 17:32

Mattie, just remember the Bossier Shale in East Texas is essentially the same as the Haynesville Shale in Louisiana. So think Haynesville Shale/Lower Bossier Shale. The Mid-Bossier Shale is a separate play just above the Haynesville Shale but it does cover the same areal extent as the Haynesville Shale. The Cotton Valley would not be the same as it consists of non-continuos gas accumulations.

In East Texas there may be two trend lines with one running due west into Harrison County while the other extends southwest toward Lufkin.

Permalink Reply by Mattie on June 11, 2009 at 5:51

Skipper,

I understand the distinction between the CV, Bossier/Haynesville, but appreciate your feedback on the trending of the Bossier. My general question was whether the Bossier overhang into Southern Desoto Parish would have an effect of improving the activity in this area (along with perhaps Northern Sabine) since I've heard lately of the completion difficulties with the high pressure, sour gas, etc. in this area having the effect of moving activity further northward. Conflicting reports, which I guess is typical in such a new, highly prospective play over such a broad geographic area.

Permalink Reply by Les Bamburg on June 11, 2009 at 7:23

Mattie, when you are referring to Bossier is that Lower Bossier/Haynesville Shale or Mid-Bossier Shale? I assume you mean the later. If that is the case, EnCana has indicated this would essentially double the number of wells per section in the long term where both plays are present (ie HS & MBS). The key is - no company has presented a good map of the areal extent of the Mid-Bossier Shale play. So it is unclear how far south it extends into south De Soto and Sabine parishes. EnCana has only completed one well to date in the Mid-Bossier Shale and that was located in Red River Parish.

EnCana has stated they are not concerned with the CO2 or H2S content as this can be addressed by simply adding treaters at their production facility location which is commonplace in many areas of the US.

Permalink Reply by Greedy Landowner on June 12, 2009 at 5:00

It is important to remember also that at this point in the game the need to get soon to expire leases drilled dictates when and where drilling happens.

Permalink Reply by Skip Peel - Mineral Consultant on June 12, 2009 at 5:16

Right you are, GL. But that should be a reminder that lessors with leases terminating this year and next have some options they should be considering. Many lessors will be approached with offers to extend their leases. What would their requirements be to execute an extension? Keep in mind that unless you've done some homework as to what percentage of your section is leased to which company or operator and there is no unit order, there is no way to know which company will eventually drill. You don't have to lease with the company that you think will be the operator of the unit. Every lessor should have a 25% royalty. If it wasn't in the original lease, get it in the extension. Then consider lease terms you would like to add. Horizontal and vertical Pugh clauses, a no cost royalty clause, etc. But stick to the basics. Then what is an extension worth as far as a lease extension bonus? Depends on the length of the extension. A two year extension should be worth twice that of a one year extension. If a lessor is leased to a lessee that they consider to be capable, the first endeavor should be to enter good faith negotiations with that lessee. There are obviously additional considerations but those will change over time and no one's crystal ball can tell whether offers will be greater or lower in the future. Too many variable. Start doing your homework now. Be prepared when the time comes.

Permalink Reply by Les Bamburg on June 12, 2009 at 16:05

GL, this the reason EnCana recently doubled their 2009 budget from $290MM to $580MM. The incremental $$$ are for "acreage maintenance" - ie additional well drilling.

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