CHESAPEAKE WINDS DOWN DRILLING IN THE HAYNESVILLE PLAY

Noticing that I had not seen a new drilling permit for CHK in some time, I checked to see the date of their last Haynesville (HA) permit.  It was S/N 244935, HA RA SUI; Gorman 23-15-11H #1, in the Swan Lake Field, Bossier Parish on May 23rd.  Reviewing the last 100 HA wells permitted, I find the following:

 

Code 03 - Permit Expired:  15 (13 were for alternate unit wells)

 

Code 31 - Shut-In Dry Hole, Future Utility:  9 (8 are for wells drilled but not fraced, 1 is Waiting On Pipeline)

 

Code 10 - Completed: 6

 

Code 01 - Permitted: 70  (24 are alternate well permits)

 

The 70 Code 01wells break out as follows:

Waiting On Completion (Drilled but not completed): 25

Completed, Not Producing (Waiting On Pipeline, Tubing, Etc.): 6

Completed And Potentialed, Production Not Yet Reported:  3

Completed, Shut-In: 1

Drilling: 4

 

This leaves 31 permits still in force based on reporting to the state and entries on SONRIS Lite.  There are only three drilling rigs reporting drilling for CHK in LA as of Friday (Rigdata Weekly Rig Report).  It would seem reasonable that the majority of these 31 remaining permits are for alternate unit wells that will expire and not be drilled.  IMO, barring any new permits, CHK will likely cease to drill  LA HA wells in the next 60 to 90 days.

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Permalink Reply by adubu on June 17, 2012 at 6:00

Skip---who else is leaving or should I say who is staying  and drilling anything except what is necessary to hold core area leases? Is dry gas DONE for present time? What price necessary to bring new leases again? What will future lease rates look like in your opinion? The huge leases will probably never be back again.

Permalink Reply by Skip Peel - Mineral Consultant on June 17, 2012 at 6:13

adubu, I don't look this stuff up in a book, I access the data from the database and then crunch the numbers.  Now if you would care to send me a retainer check for say, $500, I'll put you together a complete review of all the major HA developers.  LOL!  The easy though incomplete answer is EXCO.  They are listed with 54 HA permits.  53 are for alternate unit wells. The short answer to "why" is, they don't have much of anything else to drill.

Permalink Reply by dbob on June 17, 2012 at 6:32

I think you can look at the recent rig count posted by Les and see who is going and who is staying:

http://www.gohaynesvilleshale.com/forum/topics/haynesville-bossier-...

 

A more interesting question is who is staying to drill other stuff, be in CV, James Lime or something else depending on the region.  

Permalink Reply by GoshDarn on June 17, 2012 at 7:04

dbob:

Savvy thinkin'.

And, of course, some operators in the ARK-LA-TEX region (and specifically in NW La.) -- seem to be chasing some really shallow oil, too . . . as you well know.  Hey, at around 2000 feet or so, that's not a huge risk on the drilling overhead, either.  Punch and go.

CV, sure.  That's grabbing some eyeballs.  Gives the smaller opts some low-risk opportunity.

And, y'know, with so much already leased up and on the books for certain operators (and with bad-boy CHK on the ropes) -- there's the "call option" upside profit run which could get interesting if oil stays above $50.

So, even when oil does continue to correct down (and it will), then going long on the TX-tea commodity via a two-to-three year hold, is a compelling hedge, albeit with gutsy risk, per the near-term cycle of the coming short-term blood on the street which could wipe out some heavy investment principal and weaken the stomachs for such.

I wonder if the Saudi's are placing "puts" and shifting portfolios to safe harbors?

       

Permalink Reply by adubu on June 17, 2012 at 8:22

Skip--- Yep Doug Miller will spend the last dollar of XCO Cap-Ex for sure. Man I learn something everday--- I did not know you got paid for all your information post on this site. I sure did not imply you looked up "stuff" in books.  I thought this was a site to share thoughts and ideals about oil/gas and educate people in general about leasing, minerals, royalties,laws, economy of oil & gas, etc. Guess I was wrong!!!!---- so my apology-- I am sorry I ask!!! I'll look up what a Alternate Well is so please don't let me waste anymore your time. Thanks anyway

Permalink Reply by Skip Peel - Mineral Consultant on June 17, 2012 at 8:32

adubu, you are free to suggest to Keith that he pay me although I know how that will come out!  LOL!  You misinterpret my response and miss my joke.  Sorry if I was not sufficiently obvious.  It does take time to perform the research to satisfy my curiosity and I often choose to share it. 

A unit well is the first well drilled in a unit.  All subsequent wells are alternate unit wells.  Alt-1 is the second, Alt-2 the third, etc. 

Permalink Reply by adubu on June 17, 2012 at 8:47

Skip---- Yep that arrow (joke) just when right over my head. I agree Keith would probably not agree to paying you retainer.I also read and share my curiosity on some thread althought some people on site doesnot think much about what I have to say but that OK.LOL!!!! The additional wells in unit that are drill per spacing I just had not seen the term "alternate wells" since you had mention before these wells EUR were in 7 BCF range rather than initial well in 5 BCF range I find that interesting since in same Unit and are basically offset wells. Thanks for reply and understanding of what I said. 

Permalink Reply by Krkyoldhag on June 17, 2012 at 8:56

Thanks for whatever you decide to share..you have been a great resource for me having started from a minus of knowledge about leases, drilling and so forth.

Pretty much, my just plain aged gumption has agreed with most of your conclusions over the last few months.

You were the one who advised me to find an O&G attorney..and I did and it has been a great investment for me. 

But have a question..my lease is held by a piddling hardly producing at all oil well drilled in 1950's..so is the shale well the pad site is for on MY land considered alt?

Permalink Reply by Skip Peel - Mineral Consultant on June 17, 2012 at 9:19

Krky..., many pads get built for wells that are never drilled.  Or permitted.  Pads have no relevance in determining lease rights excepting an undrilled lease reaching expiration with no well spuded but surface operations serving to extend the lease term based on specific language.  And without a s-t-r it is impossible to review the situation in your section.  If your old well is holding an old "all depths" lease it should be scrutinized for continuous production.  Many old wells have gaps in their production history which may have terminated the lease rights.   The operator isn't going to point that out, you have to monitor the production.  It helps from a legal standpoint that the continuous months of non-production are recent, 6 or more and that no shut-in payments have been paid for that period.  Then there is the question of "production in paying quantities", Title 31 - Regulatory Statute 31:124.  I could go on but there is no need to expound on all the possibilities as all that matters is your particular situation. 

Permalink Reply by Henry on June 17, 2012 at 23:46

Talking about pads....  It is really an eye-opener to take a look at NW La in Google Earth.  The pads are everywhere and it gives you a sense of the level of activity over the last 4 years.   You realize that about 1% of the land has been used up for well pads.

 

Permalink Reply by Krkyoldhag on June 18, 2012 at 2:15

Thanks.  Its a 1950 Placid Oil Lease.  The attorney is aware that this might be the case.  But right now no one else is trying to lease my little 90 acres..The company did a "production share agreement" to add 530 acres to the unit ..I am the only owner that has not signed the PSA.  Not holding out..just haven't signed it yet.  See no point since can't get commitment on drilling.  Its be a year and now I am getting concerned about those two huge open pits on the property.  I suppose that any wild animal that fell into one could get out..but could children?

Permalink Reply by Skip Peel - Mineral Consultant on June 18, 2012 at 2:23

If "the attorney is aware that this might be the case", have you discussed sending a certified letter to terminate the lease?  And is your attorney an experienced O&G attorney?  That question has nothing to do with the fact that currently "no one else is trying to lease" your 90 acres.  Signing the agreement may remove any recourse you might have.

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