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Permalink Reply by Skip Peel - Mineral Consultant on May 27, 2018 at 3:31

That's a tough question.  Most of us Haynesville focused members don't know a lot about the Marcellus/Utica.  Generally speaking, it has something the Haynesville doesn't have - liquids.  As new 'crackers" and other chemical related facilities utilizing NGLs as feed stock come on line, Marcellus/Utica wet gas economics will improve.  The dry gas Haynesville will be squeezed between dry gas coming out of Appalachia and associated gas coming out of the Permian.  So it is a question of how much could a sale generate now vs. what CHK sees as more valuable longer term.  I'd have to flip a coin.

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Permalink Reply by Skip Peel - Mineral Consultant on May 28, 2018 at 1:51

The better question may be for Chesapeake lessors to weigh in on whether they would like to see CHK sell the Haynesville.  As much as they have had to endure, would they trade CHK for another operating company?

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Permalink Reply by Skip Peel - Mineral Consultant on May 28, 2018 at 10:48

CHK gets props for their well designs and demerits for their affiliated gas sales and higher than most post production royalty deductions.  They are a double edged sword.  They have been innovative in drilling better wells and finding new and inventive ways to cheat their lessors.

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Permalink Reply by w.r. frank on May 28, 2018 at 15:55

CHK gets NOTHING from my point of view. 3 rigs and how many acres? CHK bought back Freeport(really PXP). How many years will it take to drill the second well in a unit, let alone responsibly develop the acreage. I see their claimed return, but they don't have the financial muscle to develop. The sooner BHP and CHK are gone from the HA, the better all will be. Then perhaps people can trade WI to get CULs and be free of dumb G&T and Transport contracts that HK and CHK monetized for cash, but burdened RI with the contracts. Get ready BHP! As soon as Matador (a working interest) gets through with you, the royalty owners will be lined up to sue you (and CHK) for Floyd and Aubrey's grand speculation on NG in 2009-2011.

Technology and no cash=$0.

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Permalink Reply by Hale Yayuh on May 29, 2018 at 2:00

Screw Chesapeake. Which is exactly what they do if you leased to them. Criminals is what they are. They don't even care if you threaten to sue. Get in line with everybody else. XTO is the best operator in the play, wish they would buy them out. XTO is not only fairer and just as tech-savvy, as a subsidiary of Exxon, has more money than anybody.

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Permalink Reply by Skip Peel - Mineral Consultant on May 29, 2018 at 3:48

XTO (XOM) was late to the game in the Haynesville Play and missed out on the good Louisiana rock.  They have done quite well the best that I can tell in East Texas.  XOM might just be interested in the Louisiana side of the play as they are capable of not only acquiring Chesapeake's interests, but also BHP and QEP.  That amount of acreage might be tempting.  One stumbling block for XOM and mineral lessors was covered by w.r., lousy gathering and treating (G&T) contracts.  Don't forget that it's not just the mineral lessors that get socked with those post production deductions, the operator and working interests pay them also on their 70%+ of production.  I guess it's possible an acquisition of that size could include a re-negotiation of G&T costs. 

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Permalink Reply by Bradley McWilliams on May 29, 2018 at 4:10

Interesting point, in that it makes sense to sell the H'ville because the Utica/Marcellus is much better acreage, but that means the H'ville will bring a lower price since it's not a premier property at this time.  If SWN is any indicator, it's sell the dry gas...

Along those lines, things are pointing to an announcement soon regarding the SWN's acreage in the F'ville.  Nothing concrete, certainly no guess as to who the buyer is, but just little snippets here and there.

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Permalink Reply by Skip Peel - Mineral Consultant on May 29, 2018 at 4:16

Dry gas basins are best suited to major E&Ps with deep pockets.  The assets must be held for a number of years before they reach their highest value.  That strategy is being deployed by BP and XOM in the southern stretch of the E TX Haynesville fairway.  They are HBP'ing tremendous reserves that will be long life, high-value assets over the next decade or two.

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Permalink Reply by Bradley McWilliams on May 29, 2018 at 4:33

Sounds simple enough, and certainly makes sense.  I can tell you folks up here are hoping against hope that whoever buys comes in with guns a blazen' and big plans.  I tend to believe more along the direction you've laid out.  I say the most ambitious plans would be to take a "wait and see" attitude and just let things plod along a while, maybe a year or so, before making big plans.  Buying for the reserves on the cheap expecting prices to be higher a decade from now is as well believable.  Guns a blazen'?  At $3 gas, I'm just not seeing it.

What is the number for the Motel 6 in Odessa...

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Permalink Reply by Skip Peel - Mineral Consultant on May 29, 2018 at 5:02

If natural gas price projections for 2019/20 are accurate that might be the time for a fire sale.  The natural gas demand dynamics for the next decade should also be a little clearer by then.  Much depends on FIDs (Final Investment Decisions) occurring this year and next for the financing and ground breaking of a number of large scale LNG and chemical plants that would come on line early in the next decade.

The only turn of events that might support $3 average monthly gas prices per year would be a drop in the price of crude to the $50/barrel range.  An event that looks unlikely at this point.  I think the Motel 6 in Odessa is likely to remain full. :-(

Cheniere Makes FID On Third Corpus Christi Train

Jessica Morales  Hart Energy 

“Cheniere Energy has approved the construction of a third liquefaction unit at its Corpus Christi export terminal. It’s the first new LNG project to go ahead in the U.S. since 2015.”

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Permalink Reply by Bradley McWilliams on May 29, 2018 at 5:28

We were in Monahans a few weeks ago.  The LaQuinta was north of $300 for a night.  We stayed further east...

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Permalink Reply by Skip Peel - Mineral Consultant on May 29, 2018 at 5:30

Yikes!!!

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