Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on July 14, 2020 at 14:12

Thanks, Chad.  I am unfamiliar with the number of SWD wells in the E TX Haynesville Shale fairway.  Your right, in the heart of the LA Haynesville there was significant existing Cotton Valley production and plenty of injection wells, hundreds in fact.  The Cotton Valley is notorious for large produced water volumes.  I am hoping that the SWD well in San Augustine is a leading indicator of intent to drill new wells in that SA/Shelby country line area.

Permalink Reply by GoRicky on July 14, 2020 at 14:12

I know things have slowed down (like XTO and BP have gone dormant), but I still don't see why the private equity money is continuing to pour huge amounts of $ into drilling super-expensive wells, when Henry Hub prices are WAY below - - even - - $2.  Almost all permits to drill new (grass-roots) wells are being permitted by Aethon, Comstock, Rockcliff, Sabine, Tanos, etc... could it be that they are able to hedge future production at prices that are better than Exxon or BP?  - or  -  is it they believe that gas prices are going to double right away?  

One conundrum is that they are drilling HBP acreage, - when they don't have to -.  Chesapeake went broke... are they NEXT?

Permalink Reply by Skip Peel - Mineral Consultant on July 14, 2020 at 14:26

In many cases, yes they do have to.  Aethon has an operating agreement with Black Stone Minerals that requires a drilling schedule. BSM is footing the bill to develop their acreage and Aethon gets a cut for acting as operator.  Not much skin in the game for Aethon, so little risk.   Rockcliff and Comstock are drilling "deep rights" acquired from existing shallow production operators.  Those "deep rights" assignments also include drilling commitments.    Sabine and Tanos may be in the same boat but I have no first hand knowledge on them.  The big money for those shallow operators holding old one eighth royalty leases is in production more so than upfront cash.  They wouldn't do the deal without a commitment to drill a minimum number of wells on a set schedule.  If a company does not meet the drilling commitment, they lose the lease rights.  Pretty straight forward.

XTO (XOM) and BPX (BP) are completely different situations.  They have many options for where to focus their operations and the Haynesville/Bossier play just doesn't suit them at this time. 

Permalink Reply by Mister Sunday on August 20, 2020 at 1:19

They might just be drilling now while its cheaper to do so?

Permalink Reply by Skip Peel - Mineral Consultant on August 20, 2020 at 1:52

Could be, the number of DUCs is up.  And the drilling contracts in place currently could be cheaper than what is anticipated six or so months from now.

Permalink Reply by GoRicky on August 20, 2020 at 16:55

If Biden-Harris get elected and actually do what they say they will do (ban fracking), the shale gas plays will be opined about and (in the library) relegated to the section -  'that cleanest-burning fossil fuel disaster'.  If you are already IN on existing production, the increase in price will seem sweet, but all wells decline and there will be -0- new wells drilled.  The price will have to go skyward, because supply will go down and demand will remain constant or even increase as they drive the coal industry completely out of business.

There will be a few "dream" plays, where all you have to do is perforate; but if you can't frack, huge amounts of supply will go into decline at a precipitous rate.  Now, I dismount off my soap-box. - -

Permalink Reply by Jesse Joyner on August 20, 2020 at 19:39

Congress won't ban "clean fracking" because it's a national security issue. The Pentagon whispers in way too many ears to allow such a ban. So it's not going to happen since there's no science to support such a ban. Yet if you want to scare/stampede/buffalo folks with some sort of what-if hypothetical, Congress may one day put a sunset law on dirty coal, since there is, in fact, solid documentation to prove that coal-fired plants do harm people. Black lung has killed many miners in the last 100 years, and the toxic pollution from dirty coal is a concern, possibly in 30 years or so or after most of us are dead and gone.

Permalink Reply by Skip Peel - Mineral Consultant on August 21, 2020 at 1:00

The misinformation about Ds banning fracking has about as much basis in fact as banning guns, defunding the police and opening borders.  None of that is in the party platform and Joe Biden is on record as not in support.  All those claims are political straw men that do not bear scrutiny.

Permalink Reply by Skip Peel - Mineral Consultant on August 21, 2020 at 1:26

Here is a prediction for how natural gas is likely to fair under a Biden presidency.  With climate change acknowledged as a severe threat and with a need to reduce carbon emissions, coal fired electric generation will be phased out on a short time frame.  Utilities and merchant generators will have a choice of renewables or natural gas to replace that generating capacity.  In certain areas of the country each will have advantages over the other.  Where the sun shines and the wind blows, renewables will have the upper hand.  In the other areas, with regional access to cheap supply, natural gas will have the upper hand.  There will be new regulations for tracking and reducing methane emissions but those costs are manageable and the volume previously lost to emissions will help lower those costs.  The companies, the royalty owners and the climate all benefit.  Most electric generating facilities have 30 to 40 year useful life spans.  As the newly built modern natural gas fired plants age and renewables continue to go down in cost, the market will take care of a transition to the next era of American energy policy. 

Permalink Reply by GoRicky on August 21, 2020 at 18:34

Thank you, Skip - Now I feel so much better.  I go to sleep tonight knowing that I can rely on you to provide continued and reliable predictions as to the future of natural gas, no matter who is in office.

 

Permalink Reply by GoRicky on August 21, 2020 at 18:12

WOW - thank you, ("Double-Naught-Jessie") - I wasn't trying to scare/stampede/buffalo anybody. I was just repeating what the candidates have said about 50 times- on public TV. I was just taking them at their word... I didn't realize I had tapped into a Pentagon source (you), but I am so glad now!  

So, if those candidates say they will ban fracking, I only have two questions - - -,

(1) - Are these candidates just foolish, deeply naive, or untrustworthy - - - or,

(2) - Are they repeatedly lying to us??

There are no other bases on the diamond.  By the way, I'm thrilled to have a contact that knows the whispers of the Pentagon... while I have you, is it TRUE about UFOs??? Inquiring minds need to know.

Just one thing - if you spill the beans too much, the "powers that be" might revoke your national security clearance, so just share your secrets with me, I promise not to tell.

Permalink Reply by Jesse Joyner on August 21, 2020 at 19:01

Just offered my opinion, GoRicky. There's been talk of banning fracking for many years. It's nothing new. As a kid who grew up in Louisiana and Texas and whose family has been in royalty pay, on and off, for almost 100 years, I know not to take a lot of political gossip too seriously. Best of luck with your wells. 

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