Replies to This Discussion

Permalink Reply by Bill R on April 6, 2022 at 13:58

Thanks Rockman... was wondering because we have a lot of property with open leases all over San Augustine and Shelby Counties... several with Wells permitted, but nothing happening yet. 

Permalink Reply by Rock Man on April 6, 2022 at 14:38

Wouldn't be surprised if expiration dates control new lease drilling. 

But also think that pipeline capacity to take new 20+ million CFFPD wells may be part of the issue as to development.

I would be curious to see how many permits are "new lease" drilling vs others that are "additional wells on a lease". There is no pressure to drill the latter if there is an original well that has the lease / unit HBP.

Permalink Reply by Bill R on April 7, 2022 at 5:38

That is sort of what I was wondering... how long is an undrilled Lease valid? Permits on majority of these Wells are from 2017 - 2020... a few from 2021... nothing from this year... and many are from Pads with existing Producing Wells to hold them. 

Thanks again, helps to talk with someone and bounce thoughts off of them! 

Permalink Reply by Skip Peel - Mineral Consultant on April 7, 2022 at 5:47

All O&G leases have a primary term, usually 3 to 5 years.  Many leases have an "option to extend" the primary term by payment of an additional rental bonus prior to the expiration of the primary term.  That option is the lessee's, not the lessor's.  The vast majority of leases, particularly 20th Century leases, are "all depths".  Therefore shallow production can be holding deeper depths that had never before been explored or produced.  Across the heart of the Haynesville Fairway in Louisiana, there are sections that are surrounded for miles by producing Haynesville Shale wells but have not been developed for the Haynesville.  In almost all cases, there are wells producing from shallower formations holding the leases.  The Haynesville will certainly be produced at some time in the future but there is no compelling reason for an operator to do so until it suits them.

Permalink Reply by Bill R on April 7, 2022 at 6:59

Yeah... all are held for 5 years with option to extend some are already into the end of the extensions... all too familiar with that. Like I said that is what I was wondering about with Aethon, because they picked up some of the Leases from EXCO, Cabot, Devon and Southwestern during the 'trade off wars' and the expiration dates are right there. I know that EOG, Southwestern and a few others have the Leases secured with production, but as I said, some are untapped and undrilled. 

Thanks!  

Permalink Reply by Skip Peel - Mineral Consultant on April 7, 2022 at 7:09

It would be a surprise if those undrilled leases were not HBPed before term expiration.  If that would happen, I'd have to question the location.  Good luck.

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