Replies to This Discussion

Permalink Reply by Ginger Fife on July 10, 2011 at 5:19

Hi Skip, It's been a while since i even got interest going again on the shale business & watching the forums.  I have 14.5 acres in Vivian, section 32, Township 22 North, Range 16 West, Caddo Parish. I figured this area was dead and no one was interested in what we had up here--gas or oil?  But, i am ignorent in the gas and oil business & she shale going on's,  but from the post you just did sounds like interest had stirred up again?  What exactly does your post mean?  Is Rock wells completed drilling good?  Ginger

Permalink Reply by Skip Peel - Mineral Consultant on July 10, 2011 at 5:43

Ginger, the depressed price of natural gas, the level of continued drilling and the supply glut has caused a shift in energy industry focus to oil and liquid-rich formations.  Therefore there are new plays developing such as the Tuscaloosa Marine Shale in Central Louisiana and the Lower Smackover Brown Dense along the LA./AR. border.  However those same economics and a general perception that oil will maintain market prices around and north of $100/barrel generate interest in known conventional oil prospects such as the Annona Chalk. 

Two things to keep in mind.  Oil prospects are currently more valuable to operators than dry gas.  Conventional reservoirs are generally productive over limited contiguous areas unlike unconventional reservoirs like the Haynesville Shale.

An energy company benefits from liquids production such as the Rock Well Petroleum and can produce the reservoir with less expensive technology, vertical wells in this case.  There is no completion report posted to the database at this time so I can not speak to completion costs.  The risk associated with conventional reservoirs is that development will cause dry holes to be drilled to define the productive area.  Until a number of wells are drilled and the completions announced, the extent of the productive area will be unknown.

IMO, here is how mineral owners should consider lease offers in areas that appear to be in the general area of Annona Chalk prospects in north Caddo and the adjoining Texas counties.  Don't expect the kinds of bonus offers associated with an unconventional reservoir like the Haynesville Shale.  We will need more competition and leasing information to get to a good fair market bonus number.  As always, get the basic lease clauses that benefit lessors and protect their surface interests and a quarter royalty.  Until we have some other benchmark I would suggest that the Source Oil winning bid for a tract located in sections 28, 29, 32 & 33 of 22N - 16W (including your Section 32) in the February state mineral auction should be the minimum acceptable lease offer.  Source's bid which is public and available for review on the SONRIS Lite database was $250/acre bonus and a quarter royalty.

 

 

Permalink Reply by Checkmateking on July 10, 2011 at 5:46

Isn't this the Horizontal under Caddo Lake, thats pretty far south of Vivian

Permalink Reply by Skip Peel - Mineral Consultant on July 10, 2011 at 6:00

Yep, that's why I have made a point of saying this is a conventional reservoir and will not be productive over the kind of area that the HS is.  It's impossible to know the extent of economic production at this time. There appears to be interest in a variety of formations in this general state line area.  The Pegasi well in Marion County was a good one but it's natural gas.  The oil and liquids prospects are currently the most valuable.

Permalink Reply by Skip Peel - Mineral Consultant on July 10, 2011 at 6:06

CMK, the Source bid may have been based on the Parish Commission requiring a quarter royalty as a minimum bid but they were willing to make that offer in an area with no obvious development interest or recent activity other than the Rock Well Annona Chalk well.

Permalink Reply by Skip Peel - Mineral Consultant on July 10, 2011 at 10:44

Yeah, I agree with you CMK.  I'm going to change the title from Vivian to Oil City to be more accurate.  Thanks for the reminder.