Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on May 24, 2022 at 10:03

Before you ask any questions of a potential buyer, research what you need to know concerning your minerals.  Are there any outstanding applications for new wells?  This is something that buyers monitor closely.  Is your location prospective or proven for Bossier wells in addition to Haynesville wells.  This is something prospective buyers are loath to discuss or acknowledge.  Once you know whether you have Haynesville only or Haynesville and Bossier reserves, you can calculate how many additional new wells may be drilled in your unit.  Buyers love a unit with only the old original unit well which has declined over time and is not paying out much for most lessors but is in line for a group of new wells.  They prioritize an early return on investment.  Know what you have before you negotiate with an interested buyer.  Once they know that you are informed, they will either go away or get busy recalculating their offer.

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Permalink Reply by greenwoodshale on May 24, 2022 at 10:36

Skip , Thank you for your information . I will start some research and see what I can dig up and see if any new well applications for our section . My gut feeling tells me something is about to happen is why the offer are coming at us from several different companies .

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Permalink Reply by Skip Peel - Mineral Consultant on May 24, 2022 at 10:48

It is quite likely that when the offers come thick and heavy, someone may know something you do not.  Let me know if your need any help.

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Permalink Reply by Mister Sunday on June 22, 2022 at 8:45

I tell you what I generally do with offers.  I open them, take a look, put them back in the envelope.  Then I make some notes on the outside of the envelope as far as date, price of gas at the time, latest production numbers and physical state of the lease as far as drilling new wells or anything else I may deem pertinent.  I have a big old chunky file I put them all in. When I get phone calls I pull out the last envelope and make a note on it.

Interestingly enough, I received a letter just the other day asking me if I wanted to by some mineral acres with information of the lease and the abstract.

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Permalink Reply by Skip Peel - Mineral Consultant on June 22, 2022 at 9:26

Mineral buyers generally pay no attention to the price of gas.  Investors authorize buyers to make offers and there are offers going out continually year in and year out regardless of the price of natural gas.  Two things have happened.  Investors previously focused on oil decided natural gas was a good long term asset acquisition.  Buyers focused on oil plays, primarily the Permian Basin, got marching orders to acquire natural gas assets and the Haynesville Shale is the prime target.  Investors do look at the monthly forward futures prices to inform their offer amounts.  The price predictions out the next couple of years are more determinative than the current price of natural gas.

The number of future wells is another important factor.  One that is fairly easy to determine with Louisiana drilling units but much less so with Texas drilling units.  In Texas, unit boundaries can be amended to allow room for additional wells.  A unit could theoretically be enlarged multiple times and only loses the option to be enlarged when it encounters the boundary of a unit for the same formation.  Now with "allocation wells" there is less need to amend a unit footprint.  Operators just drill a well through multiple existing units and allocate production to each based on the linear feet of perforated lateral in each.  In Louisiana a unit boundary remains the same and it is relatively easy to determine the number of well slots that are undrilled.  The X factor is whether a unit has potential for Bossier wells in addition to Haynesville.

It is interesting that you are being solicited to be a buyer.

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Permalink Reply by Mister Sunday on June 23, 2022 at 3:21

NYMEX Futures prices for NG look real good compared to the last several years.

Maybe it s a bit more convoluted than my explanation, but when NG prices go up, offers to buy do as well.  Maybe it has more to do with the Price goes up, Operator drills more wells, Buyers make more\better offers for minerals.

I honestly thought I was getting just another offer to buy my minerals and was thoroughly shocked when I realized what it was.  I have been receiving offers to buy my minerals almost since the day I was leased by Encana in 2010.  So to see something like this being sent to an individual, I'm still of the notion that it feels like a scam. 

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Permalink Reply by Skip Peel - Mineral Consultant on June 23, 2022 at 4:17

Yeah, I've never heard of such an offer.  I think you are right.  The other side of the price coin for operators is that their costs to drill and complete are also going up.  Service companies that were squeezed in the low price years are making up for that now.  Where breakeven for many operators might have been in the $2.30 to $2.50/mcf range at the bottom of the price trend, it is probably closer to $3/mcf now and steadily rising as demand for rigs and completion crews continues to grow.  Of course that will not persuade buyers to slow down.  The investor belief in long term natural gas and LNG will continue to pump capital in to Haynesville mineral rights acquisition projects.

Got this article this morning:

Drilling activity on the rise as DUC inventory shrinks

Crude prices above $100 per barrel and a declining inventory of drilled-but-uncompleted wells are prompting producers, particularly privately held companies, to expand drilling activity, according to ESAI Energy. The DUC inventory has declined by 60% from a June 2020 peak, "leaving many producers with no choice but to accelerate drilling to keep production levels up" as "viable DUCs will likely be depleted by year-end,"

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Permalink Reply by Mister Sunday on June 23, 2022 at 4:54

DANG!

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Permalink Reply by Bill R on June 23, 2022 at 7:30

That sort of sums it up... Dang!  

Already had eight inquiries to purchase my interest this week and all well above the amounts offered prior. 

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Permalink Reply by Rock Man on June 23, 2022 at 11:29

Regardless of what you do with these and future offers, one needs to do all the can to understand that is going on with their minerals as to producing and prospective formations, past wells, offset activity, etc.

You may even need to hire a consultant to do some leg work for you.

Lack of knowledge with respect to O&G minerals will bite you in the butt more times than not. 

Knowledge is power!

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