Replies to This Discussion

Permalink Reply by Grillin' - MmmMmm on February 26, 2009 at 17:50

If all you used is the $0.50/mcf for lease operating expenses, that does not include the cost to drill. That number is typical for the ongoing operation of the well after it is drilled. Plug $7MM in year 0 of your economic model. And don't forget the lease bonus. Typical well covers 80 acres so plug in either $250 or $25,000 per acre.

Floyd's comments that HK has gone to 7.5 BCF per well for EUR and the cost of $6-8MM per well gives you a F&D cost of a little under $1/mcf. Then you've got the 50 cent operating cost, then severance taxes and gas marketing deductions. Oh, and don't forget the 20% royalty rate and Uncle Obama's share. Today, its 35% but it will soon be 50%. And I don't doubt he'll push it up even higher, the lying cheating scoundrel. But $1/mcf F&D is still pretty good.

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Permalink Reply by HBP on February 26, 2009 at 4:11

KB,
I wouldn't hang your hat on those per unit numbers (a few posts up) for now. Consider where they drilled first that produced those per unit numbers and where they are headed. Many of the future units will be the newly leased units at the higher rates - many of the first wells were on previously HBPd units.

Something to consider. $3-4/mcf gas is not good for the companies - bottom line.

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Permalink Reply by HBP on February 26, 2009 at 5:23

The only enlightenment I will offer is that the song referenced was written by Randy Newman (I think) not Joe Cocker. The Joe Cocker version is great though.

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Permalink Reply by HBP on February 26, 2009 at 6:46

Correct. One of Mickey Rourke's better roles, behind the Wrestler which is also still way behind the character "Bruiser" in "The Rainmaker".

The song was also in "Blaze" , if I remember correctly?

But anyway, Back to Shale......

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Permalink Reply by P.G. on February 25, 2009 at 4:02

Looks like a lot of leases will expire at the rate new wells are being drilled that would have held those acres right now.
Could the credit crunch be as responsible for the slowdown as low NG prices?
No credit, no leveraged dollars!
Seems kind of a waste to have leased all those acres and not drill, no matter what they paid for them.
Perhaps the OGs have stopped leasing because of the likelihood they won't be drilling them. Seems like they would want to have wells ready to go on line when prices return rather than try chasing prices with those rigs.

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Permalink Reply by Larry T on February 25, 2009 at 13:54

Just found and signed up to this site today. I am a lifelong oil and gas driller (35 yrs) , depend on these companies some of you good folks are constantly bad mouthing whining about. I also own land that has been leased to one company and another co. top leased. First off, nobody is forced to sign, if you sign a deal with out taking time to be informed and you got less than others then it is YOUR fault. No one held a gun to your head.

In our area land that leased for $250 / acre , 2 yrs later went for over $20k acre . Both deals were good at the time, as the shale technology had not been perfected and potential not known. Those who even held out at 20k per acre, are sad now.

Next item, most of these companies are fighting for survival now, due to lower prices and ($4 mcf) and about the same drilling cost. Not only that, there is a lot of anxiety over what kind of new regulations and restrictions the NObama bunch will put on them. It is tough right now for all the oil companies, but no one is whining like most of the other industries. Only thing we know is it will come back stronger than before as it always does after a downturn.

To all of you who made good money on lease bonus, good deal. To all of you who are waiting for it to turnaround and lease again at 5 figure rates, it will turn around, but nobody knows when, probably in 2010.

These companies break even point is $4.00 in the shale, with each well around 7-10m to complete.

If gas continues to go lower. There will be only enough drilling to keep leases intact.

That will lead to slower economic growth for the whole area, as 1 roughneck job equates to 20 jobs in the service company, not to mention the local economy.

The brainwashing of the population has been successful from the media on the evil oil and gas companies, these are companies in business to make money just like you and I and if they are successful we will be succesful, especially in the whole North LA areas.

Next time you bad mouth CHK / HK or the others, landmen etc, be careful what you wish for.

Larry T

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Permalink Reply by Jay Murrell on February 25, 2009 at 14:00

Larry:

There are some folks on this site for which the term "willful ignorance" was invented.

Prepare to get an earful.

Best,

Jay Murrell

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Permalink Reply by BirdDawg, plain ole' idiot on February 25, 2009 at 18:03

Jay and Larry,
And there are some people on this site for which the term "self appointed expert, I know everything, blah, blah, blah" was invented. Everyone is entitled to their own opinion, and I have yet to see anyone on here that knows all, despite what some people think of themselves. Well, I still consider Les to be the best on this site.

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Permalink Reply by Bobi Carr ("parker") on February 25, 2009 at 18:12

BirdDawg,

You left out Robert O. (BLESS HIS SOUL!).

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Permalink Reply by BirdDawg, plain ole' idiot on February 25, 2009 at 18:15

Sorry bout that.

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Permalink Reply by Snake Stewart on February 25, 2009 at 15:59

Good luck to you and yours Mr. Larry T and welcome to the site.

Watch that Mr. Murrell fellow. He isnt always this pleasant. (LOL) :-)

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Permalink Reply by Jay Murrell on February 25, 2009 at 16:23

Thanks Snake :-)

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