O.K. Newbie here so cut me some slack if I screw this up. I just noticed there's no discussion group for my parish and communication among our residents is sketchy and patchy at best because we are VERY new to the oil play, so we don't have any collective wisdom here. Any comments, insights, or even heresay welcome here. What I have to contribute is just information on lease rates and the areas they are concentrating in right now. (Averaging $150 for first three, varying for next two. From 1/6 to 1/5 royalties.) Devon is about a month into drilling it's first Tangipahoa well just a little north of me in Fluker, Louisiana. I have friends who are part of the unit but they are not hearing much of anything. Security at the site is TIGHT with our local sheriff's office maintaining 24 hour presence a couple of hundred yards from the rig itself. They ask you your business and write it all down. I think it's called a "tight hole" or something like that. They are also going to be buying all the pond water nearby. I don't know how much they are paying but will ask around.I have heard that our state is limiting the drilling of wells for water but I'm not sure of that. It was just hearsay from a friend. Well that's it for now.This is a great site. I've learned tons here. Amelia Resources has been a great help as well. Keep up the good work people.
I wish I knew more about the leasing, but sadly do not. I'm hearing that it's better to lease than not. This blog has done more for me than listening to hearsay. The landmen and more knowlegable guys that are responding have been a godsend. Please feed us more info as you get it guys! YOU KNOW WHO YOU ARE! thanks DCM, I'm hoping to get an invitation to join a unit one day. My properties are sitting near quite a few of these units, but none have been included. Our time is coming if OUR SPOT IS AS SWEET AS I THINK. I know an attorney that dabbles in Mineral Leases. He's going to educate me a little on how to read and understand these leases. From your post, I gather that you know way more than a layperson. The points that you bring forward would certainly be important to anyone signing such a lease. I hope to one day understand the intricate terms and conditions of mineral contracts.
The Tangipahoa Clerk of Court offers a remote access subscription for $20/month. Every lease filed there may be reviewed. It takes a little work to learn your way around the software and how to search but it's cheap and doable for most with basic computer skills. Beats driving down to the courthouse and pulling out the index books.
Great info. Thanks Skip.
I was reading a post by someone yesterday on some thread other than "Tangipahoa Parish Leasing" about how companies come in and grab up all the big parcels as fast as they can, thus preventing other companies from coming in to the same area because they are not interested in "working Interests", or getting their foot in the door so to speak. They do this now to keep subsequent leases prices low because they have effectlively eliminated the competition. I seem to also remember the poster mentioning that this was a result of the Haynesville shale fiasco where competition among companies turned vicious and expensive. I haven't been able to find it today but remember ( I think) that I recognized the poster as someone that has posted over here on "Tang Par Leasing". I would appreciate it if anyone who comes across the post, or the author of it, would cut and paste it over here on the "Tangi" thread. Some of us here rarely read the posts about other parishes (even though we probably should, duhhhh).The significance of the post could be that lease rates might not go to the moon, even if these wells start putting out better numbers than they are now (with the exception of a couple of home-runners), and that landowners who hold out too long, might hold out too wrong. Thanks.
Perhaps it was this discussion in the Lower Smackover/Brown Dense Group. The general progression of lease offers applies to other plays. However, I don't think you have interpreted it accurately, TangiHopeful. If this is the discussion you were referring to, read it again and tell me what you think.
Thanks for the prompt response Skip. That is the post I was looking for. I'm going to read it again tomorrow when I'm fresh. Your input is genuinely appreciated here and I think I speak for all.
Skip, I think your analysis was spot on. People need to realize that the Haynesville mania and especially the incorrect perception that everyone was getting $20,000/acre bonus was a once in a lifetime event. Also landowners need to seperate the per acre prices paid in deal between corporations/private equity and what is paid to the landowner. I follow the EagleFord and while Marathon and the Chinese paid $10-20,000/acre in corporate deals, the landowners are still only getting 1/4 of those price per acre.
Finally as a shareholder of an E&P, I don't think the only reason for the above tactic is to cheat landowners of competition. Having a lot of working interest has serious business issues. I read where I think Shell said they couldn't limit NG production as much as they wanted , because all the working interest had rights and they couldn't curtail the working interest's production. Also more E&P companies think drilling as a manufacturing process, i.e. massive pad drilling, zip fracs, and think how complicated and inefficient it is to run a factory floor that has multiple owners.
I have re-read your discussion and I confess to merging a subsequent reply about the Haynesville shale into your initial explanation and may have accordingly over-emphasized the importance of the Haynesville shale fiasco as somehow causing the present leasing process. The point I get now is that the current leasing practice you spoke of had been that way before the Haynesville fury and although the operators may have learned some lessons from it, Haynesville was so much of an aberration from the normal process that we shouldn't draw any overreaching conclusions from it pertaining to current leasing practices.
I also take from the re-read that the practice is not solely to keep leases prices low, but as you say, to keep other operators out AND to look good to the stockholders. I still maintain though, that lower lease prices, on average, will be a direct or indirect result of the practice as it does dampen the competition's interest in the area.
I also still hold to my final conclusion-although inartfully reached and not the point of your discussion-that landowners hearing about Haynesville leasing prices and comparing leasing prices down here down here where the play is unproven run a substantial risk of being left out altogether, although I should have made that "unproven" point much more clearly. I have actually heard people making comparisons to "the Haynesville leasing money" when deciding whether to lease or not, and-for reasons I won't go into-I have been called quite a bit during this leasing process down here.
I hope I was completely wrong when I said lease rates might not go to the moon if this play turns wildly successful. I will try to do some studying on the progression of the Eagle Ford Shale leasing prices as that play began panning out, even though that study is probably premature given the results of these first wells.
I hope I have clarified and corrected my thinking here, and as always, CORRECT ME IF I AM WRONG and CLARIFY me if I'm only half wrong.
Thanks again for bringing the post over, as the initial point of my post before going off on a tangent was to find it and re-read it. I read it rather quickly the other day with the intention of reading it again later but then couldn't find it again when I got home from the office. Keep up the good info.
The first point that I want to emphasize is that mineral owners who did not get leased in the first round should not think they are being "left out" and then go seeking a lease. If so they will get one of the low ball, early lease offers that I mention. If they are located in a section where a large percentage of the land has been leased and they can be patient and wait their turn, they will get a much better royalty offer. Those who own significant size mineral tracts and leased at a one-sixth or three-sixteenth several years ago will not be happy when it comes time to schedule the section for development and the operator comes back in and gives all the smaller tract owners who were skipped the first time around a quarter royalty. An operator wants every last acre they can lease and when the time comes to drill they will not wish to waste time over drawn out negotiations. The last lessors will get the best royalty. Doesn't matter whether they have a tenth of an acre or 100.
Bonuses. Trying to time the top of bonus offers is like trying to time the stock market. It Can Not Be Done. No one will know the top until it has passed. Bonus offers will improve based on the overall performance of the early unit wells for those within a reasonable vicinity. The closer the better. And the more productive the wells, the more operators will be willing to offer for a bonus. I would not be surprised at all if offers will improve to $500 -$1,000. I can even see a scenario where operators compete over acreage where their lease blocks meet that could push offers into the $2000 - $3,000 range. The problem is that each of these scenarios are dependent on specific details which mineral owners don't understand and often don't care about. They simply think they deserve the highest offer they've heard of. That's what gets them in trouble. And that's what I try to help them avoid here on GHS.
Note that all this is dependent upon a successfully proven TMS Play.
The Haynesville Shale was an early unconventional play. It was unclear at the time how many really good unconventional reservoirs existed across the U.S. The concept of the "Shale Haves" and the "Shale Have Nots" gripped the industry. All the larger companies in the natural gas focused portion of the industry had to make a choice, join in or be left out. Chesapeake and Petrohawk set a painful example for their peers in the Haynesville. One that I think will remain rare well into the future. Think of the prices paid and the current price of natural gas! Now it is obvious that there are numerous unconventional plays for operators to choose from and that they will refrain from too many diving into the same one and creating the kind of lease frenzy that we saw in the Haynesville and Barnett plays for those brief but memorable months.
Someone who has land near the Fluker well (Soterra 6 H #1) said that Devon has moved in six large tanks. I was riding around yesterday and rode up to the beginning of the driveway just to try to see the flare. Couldn't see it because of the sun in my eyes but two large 18 wheeler flatbeds were pulling out of the place. Why keep working on this thing with so little oil coming out? I've heard they need at least hundreds of barrels per day to be commercially viable. I guess a little oil is better than none.
Still much science to be gleaned from the Soterra 6H. I think EnCana's Weyerhaeuser 78H is worth noting. It had an IP of 280 BOPD on a 14/64" choke and after cleaning up increased to a monthly average of 597 BOPD. An impressive improvement. The Soterra 6H started out much lower, 35 BOPD, but that was on a 6/64" choke. Initial Production is a reasonable early gauge of potential productivity if choke and pressures are taken into account. However the TMS has produced wells with good IP's in the past that experienced steep declines. Six and twelve month production numbers will be good future benchmarks to watch.