Replies to This Discussion

Permalink Reply by Greedy Landowner on June 21, 2013 at 11:05

I have small tracts both leased and unleased with CHK.  Your brother is operating under the assumption that you won't be cheated if you are leased.  I would encourage him to review discussion on this site discussing the main points of contention with CHK a. underselling your gas to themselves via their midstream component (which has been sold but the verdict is still out on their current behavior) and b. indirectly deducting from the royalty via exaggeration of drilling costs which are deducted before the royalty is calculated regardless of what the lease language says on this topic. I'm not trying to slander that operator, just summarizing what I have read in addition to my own first had personal experience.  

Regardng their behavior with me as UMI, they follow the mineral code to the "t".  Nothing more, nothing less.  Reports come and checks come as set forth in the code. I did challenge them on an issue via certified mail and I got nothing meaningful from them in response.   If you remain UMI with them you will get a ledger statement for each charge associated with the drilling of the well.  To me the amount of some charges makes sense, but others were a little out there.   It's up to you to decide if the charges are reasonable but leased or unleased there isn't any means of challenging them on the drilling costs and with only five acres you can't really tie up with them legally.

The paragraph above discussed drilling charges, which are not operator charges for supervision deducted from UMI which are allowed by the mineral code.  My experience with CHK is that the amounts appear reasonable and I have never questioned them.

The decision to lease is highly individualized but given the fact that you have a small tract with multiple heirs and no lease bonus offer plus no payment of royalties already produced I personally would remain unleased.   The well is reaching payout so you will soon get paid provided everything is correct regarding division orders.  Your brother can lease his own interests if he feels better by doing so.  

Good luck and let us know how it turns out

• ▶ Reply

Permalink Reply by P.G. on February 18, 2011 at 4:50

Why should agreements between the operator and other mineral owners become an expense for UMO?

• ▶ Reply

Permalink Reply by DrWAVeSport Cd1 on February 18, 2011 at 8:25

UMOs and royalty owners alike, read the last statement made by Greg Albrecht, chief economist for LA Legislative Fiscal Office:

 

"La. misses shale riches"  (Feb. 7, 2011) @ http://loga.la/haynesville-shale-news/

 

"About 85 percent of the wells' total production is generated in the first SIX months, Albrecht said.  By the END of the First Year, the well has basically been DRAINED."

 

According to Our Louisiana Expert Byron Henderson (La Dept. of Revenue), "it takes on average 18-20 months for energy companies to recover the cost of the well."

 

Somthing smells strongly strange here?   Who's Running this show in Baton Rouge????

 

DrWAVeSport Cd1   (Feb. 18, 2011)

 

Also interesting read @ same site:

 

  "Mr. Ruffalo and Mr Fox Go to Washington, Ask for Moratorium on Fracking"

 

T. Boone where are you!!!!

 

 

 

 

• ▶ Reply

Permalink Reply by Spring Branch,mineral owner on February 18, 2011 at 9:25

Columnist John Maginnis had the same bunk in an opinion column in the Shreveport Times on Wednesday, Feb. 16.  He must have gotten his information from Greg Albrecht of the Legislative Fiscal Office, who may be a great economist, but apparently knows precious little about the decline of Haynesville Shale wells.  He is confusing the words "declining" and "depleting".  To say that in the Haynesville Shale, "About 85 % of the wellls' total production is generated in the first SIX months (at least Maginnis stretched it out to a year)" is an untruth of the first magnitude.   The question is .....Is Albrecht deliberately lying or is he just ignorant.  It is clear that he wants the legislature to end the severance tax exemption for horizontal wells.  Why else would he be spreading such an untruth about the depletion of the Haynesville.

The truth is that though the Haynesville wells "declined" about 80-85% in the first year of production (prior to restricted chokes), that 1st year production (read decline) resulted in approximately 30-35% of the ultimate reserves being produced, by most estimates.  Certainly not 85 percent of ultimate reserves!  Pretty meaningful difference between the two.  I havent seen any specifics, but I would assume that on restricted chokes, the 1st year depletion could be down to 25% or so of the ultimate reserves.

Somebody needs to get into Greg Albrecht's ear before he is able to use his grossly inaccurate numbers to convince the legislature to end the Severance tax holiday which we all enjoy as royalty owners. 

In short order many wells will have been producing for two years or will have payed out.  At that time plenty of Severance tax dollars will be going into Louisiana Dept of Revenue's bank account.  Heck I haven't been reimbursed the Severance tax dollars that were withheld from me over a year ago.  The State must really like to hold onto my money.

• ▶ Reply

Permalink Reply by DrWAVeSport Cd1 on February 18, 2011 at 10:25

SB,

 

Thank you for your insight.  Maybe you should apply for Albrecht's job.  IMHO, What a bunch of idiotic statements out of individuals who are paid by our tax dollars (especially HS tax dollars!) to represent the Haynesville Shale and the State of Louisiana with a wee bit of KNOWLEDGE before they SPEAK!   Especially IN PUBLIC & ON THE RECORD.

If True, just those two tiny stupid statements at the end of the "La. misses shale riches" article would send O&G investors/shareholders headed for the hills, and we as Louisiana taxpayers, royalty owners, UMOs, etc. have been royally duped.  Chk, HK, XMO, you better pack up quick! 

 

Whether or not Albrecht, Henderson or any other So Called Experts from the State of Louisiana  (per the Haynesville Shale) are "deliberatly lying or just ignorant," this kind of publicity on the HS coming out of Baton Rouge is irresponsible and needs to stop.

Talk about putting both feet in mouth.     And these are the individuals who are at the helm of the Louisiana HS Bank & Trust (so to speak)????  

Let's require that all Louisiana State Employees who hold on to the fiduciary responsibilities of the " LA HS Bank & Trust " and are representing us as LA taxpayers...get at least as educated on the HS as most GHSers! 

 

Maybe these buffoons need to become GHSers?  It would be a good educational start!

Albrecht, Henderson, Jindal?  Are you listening?  Maybe you can start a new GHS MEMBER GROUP:  The HS Louisana State Government Employee Group...and then sub-groups under that, i.e.  Legislative Fiscal Office, Dept of Revenue & Taxation, LOC, DNR, Governor's Office, etc. 

 

I still get surprised and amazed every day at what our Louisiana State Taxpayer-Paid Employees/Figures/Reps. say in the press.  This article just confirms my belief that the LA State Government employees in Baton Rouge are totally clueless as to the power and potential of the Haynesville Shale and other future O&G investments in our state.   They have no insight, no wisdom, no direction, and no plan...except for spending the money! 

 

SB, I agree with you 100%.    Thanks for your input, as always.

 

DrWAVeSport Cd1  (Feb. 18, 2011)

 

 

 

 

 

 

 

• ▶ Reply

Permalink Reply by Les Bamburg on February 18, 2011 at 18:04

SB, I hear absurd statements by federal and state politicians every week and like you I can't determine if they are lying or just stupid.  On top of everything else they seem to only listen to environmentialists and college professors.  Talk about the blind leading the blind!!!

• ▶ Reply

Permalink Reply by Spring Branch,mineral owner on February 18, 2011 at 23:28

You are so right, Les.  I have no idea whether anyone in the Legislature reads GHS or not, but it concerns me that the Legislature, dealing with budget shortfalls , would listen to garbage rather than factual information.  I think the future retention of the severance tax holiday on horizontal wells may hang in the balance.  I just had Petrohawk initiate the deduction of Severance tax from two of my wells....15/11 Section 32 & 34.  They have not been in production for two years (one for 13 months, the other for 15 months) so I have to assume the two wells have reached payout.  Now understand, neither I nor Petrohawk have been reimbursed for severance tax that Petrohawk deducted and sent to the state for about the first six months of production  on the two wells until the wells were certified as horizontal and elligible, but hopefully I will some day.

Louisiana legislators, are you listening?    85% of the reserves of a typical Haynesville well are NOT produced in the first 6 months or the first year of the life of these wells.  If the Legislative Fiscal Office Economist is telling you that....... it is NOT TRUE!

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on June 21, 2013 at 3:37

UMIs are not due royalty on past production when executing a lease on minerals in a producing unit.  And the standard lease offer to small mineral interests by multiple HS operators for the last few years now has been a quarter royalty and no bonus.  I understand that many mineral owners are not happy with that and they resent the operator, and likely the industry,  However that's reality and there is nothing they can do about it except refuse to lease and remain a UMI.

Here's why IMO that is a poor decision.  Anger and fear often lead to poor decisions.  Leasing minerals should be a business decision, not a personal grudge match.  Regarding small acreage, mineral owners who think they are hurting the energy company are mistaken. The focus should be solely upon what is in the best interest, long term, of the mineral owner and their heirs.  In all the acrimony it is often forgotten that a Haynesville Shale unit will have multiple wells over time.  Quite possibly 8 or even 16 depending on location.  Making demands or expecting favorable terms when only one well has been drilled especially when it has declined in production to the point that the operator has little incentive to be aggressive with a lease offer doesn't make sense.  For the UMI what is important is the production from those future wells.  And the royalty and lease terms other than a bonus are the key to making the most of that future royalty income.  I understand that mineral owners want a bonus in addition to that quarter royalty and beneficial lease terms so I suggest that they wait until the next well in their unit is permitted and then restart lease negotiations.  In that scenario the operator does have an incentive to offer a bonus on small acreages.  The big bonuses are long gone and UMIs should understand that.  For a new well permitted or drilling today I would expect a bonus in the range of $500 to $1000.  In the future, with improved nat gas prices, it's possible that could double.  For small mineral interest anything beyond that is unreasonable expectations IMO.

One last fact that UMIs should take into account.  The price of natural gas is a key factor in a well reaching payout.  There is a significant number of Haynesville Shale wells already drilled that will never reach payout owing to depressed nat gas prices.  Operators will rely on future wells for their return on investment. 

Lessors receive royalty payments whether a well will turn out to be profitable or not.  UMIs receive nothing from a well that does not achieve payout.

• ▶ Reply

Permalink Reply by 1kw6x71km1v37 on June 22, 2013 at 7:09

The days of big bonuses are hardly over. They just are not going to landowners. Investors typically buy into a leased up play for anywhere from $3000/acre to $15,000/acre depending on the prospects and the hype. To paraphrase one well known party commenting on the Utica play, "At these prices, we don't need to make money on the wells." The money is in the flip of working interests to big players, who often pony up a wad of cash and later contribute to some or all of the drilling costs in return for a 25% or more of the WI. Reuters has done the most coverage of this topic, articles should be in their archives if not readily available on the net via search string. The Wall Street Journal is another outstanding source of information.

However, what Skip Peel says about leasing versus UMI statusis especially sobering if one has limited acreage. If you go downhole unleased and the well will not reach payout, it's all over but the heavy drinking on the old homestead porch as well as the crying.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on June 23, 2013 at 2:11

cs, I am referring to the dollar amount of lease bonuses.  They are paid to mineral owners, not investors.  Although the depressed price of natural gas is a regular subject of discussion here on GHS some don't make the connection to well payout.  Lessors get royalty on wells based on production regardless of payout.  UMIs receive no compensation until their well reaches payout.  A very large number of Haynesville Shale wells drilled over the early years of the play will never payout owing to production under depressed prices.  And a good many of those wells that do reach payout will do so at a point in time when they are largely depleted and production is so low that even a UMI's 100% share will be paltry.  The operator will recover the proportional cost of a UMI's acres out of their share of production.  They won't make a profit on that production but it won't cost them anything either.  The party to lose in this scenario is the Unleased Mineral Interest.

• ▶ Reply

Permalink Reply by Joe Aldridge on June 23, 2013 at 4:33

Skip,

I think he meant "speculators" not "investors". Just my read.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on June 23, 2013 at 4:47

I thought so too, Joe. However I wanted to take the opportunity to expand upon my cautionary tale regarding life as a UMI.  IMO far too many look at the prospect of going unleased as punishing the operator.  The transgressions of the industry particularly those of one certain company often get over emphasized in discussions.  Yes, there are some complaints that are well founded and cry out to be addressed.  But there are also a significant number of posts and opinions that are the result of inexperience, poor information and anger/fear.  (cs, I talking generally here and my comment is not aimed at you.) What members decide in the management of their minerals is their business.  However one of the best elements of GHS is a variety of viewpoints and the ability of members/readers to decide for themselves what to take away from our discussions.

• ▶ Reply

• ‹ Previous
• 1
• 2
• 3
• 4
• Next ›
• Page