Replies to This Discussion

Permalink Reply by ALongview on December 9, 2008 at 2:22

Wow, no wonder they want to pay $500/acre now. Times are tough out there!!!!!

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on December 9, 2008 at 2:33

AL. I was not aware that HK was offering $500/acre. And if times are not actually tough, they are tight. There needs to be a lot more high production wells turned to production ASAP by all operators in the Play as cash flow is critical to generating development dollars. A modest increase in the price of ng wouldn't hurt either. The ability to secure credit or issue additional stock seems to have disappeared. Highly productive wells help asset value. And as such, may help bring in additional development investments through joint venture partnerships.

• ▶ Reply

Permalink Reply by ALongview on December 9, 2008 at 2:43

Skip, I was joking about the $500/acre based on the fact that many on the site have claimed that people should sign for whatever they are offered because the money wil never come back. With production like this, whether they slow down or speed up drilling and completion based on need for cash or stock price bosts or market price for gas, there is a lot of value in the land/leases to both the owner and the o&g companies. That's all.

• ▶ Reply

Permalink Reply by HBP on December 9, 2008 at 2:48

Thanks for the clarification Longview.

• ▶ Reply

Permalink Reply by ALongview on December 9, 2008 at 2:49

Sorry for any confusion!!!! Serious stuff on here this morning : )

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on December 9, 2008 at 2:56

AL. No apology necessary. This is great news. The slow down in development is hindering aggressive new lease acquisition. If the economic climate does not change drastically in the near future, the only way that leasing resumes in earnest and lease values increase is through increasing cash flow from production. There will be a steady increase in these types of announcements. We should all hope that they contain initial production figures like theses.

• ▶ Reply

Permalink Reply by Mattie on December 9, 2008 at 3:31

Al & Skip:

You are both correct....this is good news, and the only thing that will get bonuses back up....just don't see the $10K+ offers again, though....at least, not anytime in the next 2-3 years based on this financial crisis.

We need to keep in mind that these are IP's, and nowhere near reflective of sustained flow rates. The effect will be to "pump the stock", which could use some oxygen right now because many of the patients are on life support. But, as Skip says, it doesn't necessarily translate to big bonuses. While any sizable increase from $500/ac to $1,000-$2,500/ac would be nice for any mineral owner, the real value will be in negotiating a higher royalty and getting a well drilled.....along with some uplift in prices.

• ▶ Reply

Permalink Reply by Bacon on December 9, 2008 at 3:38

If you get a 30 mmcfd well and you have an acre at 20% royalty at $6mcf (estimated), your looking at around $1600 a month. Amazing that so many are hung up on the bonus.

• ▶ Reply

Permalink Reply by Grice on December 9, 2008 at 4:23

Not to sound too contradicting, but what happens if the well is capable of producing 30mmfcd, but is shut-in for a long length of time, until it becomes more economical to produce? Would the reduced bonus offer, or the potential future sell of the production, counter the amount of loss from the well being shut-in? While the long-term benefits do sound promising, there are little guaranties of when, or how much those benefits will be. Bonus money is a "now" guaranty, which may relieve the landowner's consideration on "later" royalties. Many landowners never purchased their property, with the intent to market the underlying minerals. So, if they landowner never market the minerals, they have lost nothing.

Not to subject more contradiction, but if you are suggesting that "future" royalties should be the main focus, then shouldn't the "future" market price also be considered. While prices have fallen recently, there are supporting factors which lend to increased prices in the following years. Should the landowners settle at todays prices, or wait till prices return to a more economical position? The O&G companies have claimed the declining market prices is partly to blame for the current lease slowdown. Relating back to my previous comment, the typical landowner never intended to market the minerals beneath their property. It is the O&G companies who desire to market such minerals, and do so at a profit to the company. Shouldn't the landowners be able to base their decisions, using the same strategy?

Permalink Reply by Bacon on December 9, 2008 at 4:57

Grice - At 30mmcfd that well is going to pay for itself in a month or two. Pretty economical already. I suspect they'll figure out a way to use all this gas pretty fast if 30mmcfd starts to be the norm.

Permalink Reply by Bacon on December 9, 2008 at 3:23

I'm wondering if HK is employing some new techniques to get the 25-30mmcfd figures or have the other companies been holding back on the production figures? Have there been a lot of 30mmcfd wells announced lately?

• ▶ Reply

Permalink Reply by Bacon on December 9, 2008 at 4:58

30/64 is pretty normal isn't it?

• ▶ Reply

• ‹ Previous
• 1
• 2
• 3
• Next ›
• Page