I am duplicating this discussion in the Mississippi Mineral Owners Group in case any group members are not part of the Tuscaloosa Marine Shale Group where the original is posted. Since we don't want replies in two duplicate discussions, this one is for notice only and is closed to replies. Please use the link at the bottom to go to the original discussion where replies may be made.
A recent reply by a MS member reporting a new lease offer at lower than previous terms and a discussion about the possibility of TMS development re-starting made me consider whether a discussion on the future of the TMS Play might be in order.
The State of the Play
If the million acres under lease by all the TMS operators were to be drilled to hold the leases in force it would take about 550 wells. So far less than 90 unit wells have been drilled. Since the play has become uneconomic due to low commodity prices it appears likely that somewhere in the neighborhood of 200,000 acres will be HBP (Held By Production) leaving 800,000 prospective acres, in both state, where many leases will expire unless extension options exist and are executed.
The majority of projections for future commodity prices, particularly crude in the case of the TMS, do not see $100/barrel for many years perhaps a decade or more. There's been a lot of speculation about the minimum price required to make the TMS an attractive investment. I don't know what that number is and I expect it is somewhat different for each TMS operator. Most of the potential future events that could impact the price of crude would add to the existing over supply and prolong the period of depressed prices.
It should be understood that regardless of the reduction in well cost brought on by the collapse in commodity prices the TMS will likely remain a play with one of the highest, if not the highest, well costs relative to all the other plays owing to its extreme depth. In other words there currently does not appear to be any future events that would make TMS investment attractive short of an unexpected and significant increase in the global price of crude.
Mineral owners in the prospective TMS areas should consider whether they wish to help make the development economics work for the companies that have made a commitment to the Play. At the original lease terms for bonus and royalty the TMS is not an attractive investment at $60, $70 or maybe even $80 crude prices depending on specific location. Lower bonus and royalty terms are not what any mineral owner wishes to contemplate. The interests and needs of mineral owners vary quite a bit. My business is built in large part on assisting mineral owners to get fair and beneficial lease terms so I do not broach this subject lightly. It is possible that for the foreseeable future development of the TMS may hinge upon mineral owners accepting lesser terms to facilitate development. I am not advocating just signing the standard lease form. There are lease terms other than bonus and royalty that should remain priorities.
Considering the significant differences in the MS and LA Mineral Codes, LA mineral owners have more to consider and MS mineral owners are subject to laws limiting their ability to negotiate. I am curious of the opinions of the members and look forward to reading your replies.
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