Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on January 5, 2015 at 15:29

Hedge positions will be critical to sustaining drilling budgets.  When hedges expire companies will be fully exposed to the market price.

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Permalink Reply by adubu on January 5, 2015 at 17:11

correct and most only hedged about 50% over next 12-24 months and future prices too low to hedge out > 2016  some may take profit on hedge and pay down debt if they have adequate cash flow at these low prices to cover expenses otherwise with decrease capex to ride the storm out. 

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Permalink Reply by john goodday on January 12, 2015 at 9:47

$2.79 in the dead of winter!   When warmer temps start to appear and the hedges roll over - real harsh economics will  come into play! How many BCF will it take for an Operator to break even on a $9 million well in the Haynesville?  I'm guessing that at $2.50 Nat. Gas price - 5 BCF to break even.  How many Haynesville wells make that kind of gas?  Even for those that do exceed that EUR-  then what do you really have left in the reservoir to show your stockholders as profit?  

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Permalink Reply by Skip Peel - Mineral Consultant on January 12, 2015 at 9:59

Before making any assumptions concerning a specific operator's Rate Of Return on Haynesville Shale wells, check to see their production hedges.  Some could very well have hedges on 2015 and 2016 production.  I suspect that hedges for both years are higher than $2.79.

Also forget spot prices and futures prices, they are largely irrelevant to operator cash flow.  Any HA operator that is selling un-hedged production by monthly contract is getting at least $3.189 as that is the settlement for January 2015 gas delivery. 

5 BCF would be marginal Tier Two wells.  The bulk of current drilling is in better rock.

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Permalink Reply by Thomas C. McKowen, IV on January 12, 2015 at 11:22

Skip,

        You refer to Tier One and Tier Two wells.  Where can I find out which areas are considered in what tier.  I am interested in Bienville Parish near Lake Bistineau.

Tom McKowen

 

 

Permalink Reply by Skip Peel - Mineral Consultant on January 12, 2015 at 11:46

Core = 8 BCF and greater per well

Tier One = 6 to 8 BCF per well

Tier Two = 4 to 6 BCF per well

Tier Three = Less than 4 BCF per well

Note: There are very few maps that depict areas by EUR (Estimated Ultimate Recovery.  And most are several years old.  You have to review production in the wells in your area.  The most basic barometer of rock quality is that a typical horizontal well (pre-Cross Unit Laterals) will produce approximately 80% of EUR in the first two years.  Example, a well that produces 4 BCF in the first 24 months should have an approximate EUR of 5 BCF.

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Permalink Reply by Thomas C. McKowen, IV on January 13, 2015 at 4:08

Skip,     Thanks for the information.  The area I'm looking at seems to be around 3 BCF.  It looks like it will be a while before we get any new wells.

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Permalink Reply by Skip Peel - Mineral Consultant on January 13, 2015 at 4:16

Yep, Tier Three or marginal Tier Two.  As long as there is production sufficient to hold the leases in force energy companies are unlikely to drill any area that doesn't have an EUR per well of 5 BCF. or greater.  As long as those operators continue to drill Haynesville Shale they will learn to drill better wells and produce an MCF for a lower cost.  Areas of marginal rock will benefit in the future.  And if your alternate unit wells produce in a future environment of higher prices your royalty income will to some extent make up for the delay.

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Permalink Reply by adubu on January 15, 2015 at 16:18

skip--- data from two wells in separate units  continuous units ( 700 acres each) N/S that are in Shelby though near Martinsville, Texas both HS wells  

first well flowing 40 months -- IP at 8.8mmcfd at 12 months still flowing 5.6 mmcfd at 24 months 3.3 at 36 months 2.0 and at 40th month still at 1.8 mmcfd   total after 40 months 5.24 BCF ( Lateral 5,000 ft)

second well to south IP 7.6 after 15 months on line total 2.8 BCF with present flowing 4.5 mmcfd ( lateral 4553 Ft)

Both operated by XTO--- first well is ZIPS, DU and second well is the Golden Flash,DU -- What's your opinion on possible final EUR of these wells 

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Permalink Reply by Skip Peel - Mineral Consultant on January 15, 2015 at 16:33

How about cumulative production at 24 months for both?  IP and current flow rate are snap shots in time that can be misleading.

XTO well designs have changed quite a bit over that time frame.  If you'd like to provide a little more information, how about lateral length, number of stages and IP flowing pressure?

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Permalink Reply by adubu on January 15, 2015 at 16:39

I look that up and get back to you few minutes 

correction unit sizes   ZIPS 483 ac  and Golden Flash only 230 ac units

Specific Lease Query Results
Query Path: Search Criteria > District: 06 Date Range:   to	Related Links O&G Directory O&G Proration Schedule Offshore County Map
Production and Total Disposition   Disposition Details   County Production    Search Criteria: Lease Name: ZIPS DU , Lease No.: 262840 , Well No.: 1H  Well Type: Gas  District: 06  Lease Production and Disposition  Date Range: Jan 2011 - Oct 2014  39 results Page: 1 of 1 Date GW Gas (MCF) Condensate (BBL) Operator Name Operator No. Field Name Field No. Production Disposition Production Disposition Aug 2011 5,454 5,454 0 0 XTO ENERGY INC. 945936 CARTHAGE (HAYNESVILLE SHALE) 16032300 Sep 2011 241,017 241,017 0 0         Oct 2011 287,599 287,599 0 0         Nov 2011 272,013 272,013 1 1         Dec 2011 265,376 265,376 0 0         Jan 2012 251,997 251,997 0 0         Feb 2012 225,295 225,295 0 0         Mar 2012 229,179 229,179 0 0         Apr 2012 210,570 210,570 0 0         May 2012 206,451 206,451 0 0         Jun 2012 189,019 189,019 0 0         Jul 2012 157,843 157,843 0 0         Aug 2012 173,719 173,719 0 0         Sep 2012 163,076 163,076 0 0         Oct 2012 160,227 160,227 0 0         Nov 2012 147,583 147,583 0 0         Dec 2012 144,692 144,692 0 0         Jan 2013 105,447 105,447 0 0         Feb 2013 116,638 116,638 0 0         Mar 2013 127,926 127,926 0 0         Apr 2013 117,913 117,913 0 0         May 2013 115,537 115,537 0 0         Jun 2013 106,174 106,174 0 0         Jul 2013 105,326 105,326 1 1         Aug 2013 104,134 104,134 0 0         Sep 2013 97,728 97,728 0 0         Oct 2013 96,867 96,867 0 0         Nov 2013 88,971 88,971 0 0         Dec 2013 88,192 88,192 0 0         Jan 2014 82,362 82,362 0 0         Feb 2014 71,482 71,482 0 0         Mar 2014 75,148 75,148 0 0         Apr 2014 70,052 70,052 0 0         May 2014 68,740 68,740 0 0         Jun 2014 61,340 61,340 0 0         Jul 2014 61,791 61,791 0 0         Aug 2014 38,525 38,525 0 0         Sep 2014 55,763 55,763 0 0         Oct 2014 55,104 55,104 0 0         Total 5,242,270 5,242,270

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Permalink Reply by adubu on January 15, 2015 at 16:44

Search Criteria:
Lease Name: GOLDEN FLASHES DU , Lease No.: 271137 , Well No.: 1H  Well Type: Gas  District: 06  Lease Production and Disposition  Date Range: Nov 2011 - Oct 2014
16 results Page: 1 of 1 Date GW Gas (MCF) Condensate (BBL) Operator Name Operator No. Field Name Field No. Production Disposition Production Disposition Jul 2013 18,657 18,657 0 0 XTO ENERGY INC. 945936 CARTHAGE (HAYNESVILLE SHALE) 16032300 Aug 2013 235,514 235,514 0 0         Sep 2013 234,315 234,315 0 0         Oct 2013 231,126 231,126 0 0         Nov 2013 204,803 204,803 0 0         Dec 2013 199,483 199,483 0 0         Jan 2014 195,996 195,996 0 0         Feb 2014 172,770 172,770 0 0         Mar 2014 184,864 184,864 0 0         Apr 2014 173,490 173,490 0 0         May 2014 172,718 172,718 0 0         Jun 2014 159,704 159,704 0 0         Jul 2014 147,985 147,985 0 0         Aug 2014 154,448 154,448 0 0         Sep 2014 144,019 144,019 0 0         Oct 2014 138,906 138,906 0 0         Total 2,768,798 2,768,798

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