Replies to This Discussion

Permalink Reply by olddog573 on July 31, 2009 at 2:43

http://www.gohaynesvilleshale.com/group/sabineparishnetwork/forum/t...

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Permalink Reply by Taylor on July 31, 2009 at 2:46

Thanks olddog573. Good to know.

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Oil & Gas ProPermalink Reply by Dion Warr, CPL on July 31, 2009 at 5:06

Parker:

You are also assuming

(a) full development utilizing horizontal wells
(b) top-tier completion and frac techniques & production management
(c) all well completions having no major problems or restrictions in flow

What is generally touted in the public domain are the "hits" (orig. 10mmcfd+ IP completions, now 15-20mmcfd+ IP completions) while there are a significant section of wells completed at below 10mmcfd IP that will not economically warrant the drilling of a "replacement" well in a long-term infill drilling plan.

A good model should take these types of risk into account as well. You should expect this 'discounting' along with the discounts for depletion and inflation, especially if you are looking to market your royalty. Many folks expecting to receive offers of middle or upper five-figures per royalty acre have been very disappointed by the market, especially in its current condition.

Also germane to the discussion along with the production and price modeling will be long-term operator behavior resulting from political issues and further regulation. While each unit will accommodate the drilling of say, eight horizontal wells, the reality is that each unit will not be drilled to depletion immediately in a sequential manner, and with larger operators the interval between drilling successive wells within the same unit with respect to total wells drilled by a given operator could reach into the hundreds of wells, and could represent years and years of drilling and production history per unit. In such a scenario, a leased mineral owner will experience large oscillations in terms of royalty collections, so plan for the 'valleys' in between the 'peaks'.

Additionally, the market conditions, fundamentals and technology which drive oil and gas development today in the HS can and will change over the coming decades, changes that could induce increasing development in the HS area or reduce same. Considering that each prospective HS unit will more than likely represent a 30 - 50 year developmental case study, the mineral owner(s) within each unit will experience this as a nearly lifelong event, even in the context of 'continuous development' of the HS as a gas field.

Bottom line: I would reduce your individual expectations by half or a third over the productive life of the unit to be truly 'conservative', as well as account for the fact that "individual results may vary".

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landownerPermalink Reply by Bobi Carr ("parker") on July 31, 2009 at 5:16

Dion,

I did factor in 50 year development.

But I didn't fact or unitization of the HOSS, CV, & LCV. I would think they could be quite substantial over time too. Oh yeah, I left out the oil that may be 20 miles below the surface too (LOL) and I didn't even factor in the adamantium.

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landownerPermalink Reply by Bobi Carr ("parker") on July 31, 2009 at 5:20

The main purpose of the discussion is to give Taylor a good idea of how many shoes she will be able to buy.

Of course, some could be on sale. The price of shoes could go up or the price of shoes could go down. Or the new jet packs that Earlene will be using might only transport fringe wearing boots, etc.

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Permalink Reply by Taylor on July 31, 2009 at 5:22

WTH?

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landownerPermalink Reply by Bobi Carr ("parker") on July 31, 2009 at 5:33

Taylor,

I also forgot to factor in that activity could increase if you go shoe shopping.

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landownerPermalink Reply by E & E on July 31, 2009 at 5:38

Parker,
The only adjustment I see is that E & E are UMO.

Working off Parkers numbers - E & E @ 100%: $81,250 X 4(100%) = $325,000 per acre minus the cost of well & service over the life is oh so doable. A $9 million well cost per acre is only $14,062.50 X 8 wells = $112,500 which leaves $212,500 per acre for a UMO. They are losing $131,250 per acre @ $4 mcf, which we know wont last. Now to throw in the servicing.......Hell let em have it.......I'll still be golden. But mostly importantly my lands will be protected completely!!!!

Earlene barefoot UMO

P.S. I just love that these are "conservative" numbers. Can't wait until 01/01/2010.

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landownerPermalink Reply by Bobi Carr ("parker") on July 31, 2009 at 5:48

Earlene,

All I have to say about it is send Taylor back to work shopping for those shoes so we can get things rolling.

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landownerPermalink Reply by E & E on July 31, 2009 at 5:56

Parker,
We have a freight train running @ us, but Taylor sure could do some shoe shopping for ya'll. I have decided to stay barefoot.......
Earlene

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landownerPermalink Reply by Bobi Carr ("parker") on July 31, 2009 at 6:03

Earlene,

Yeah. I saw all of the Unit applications for the Sligo field.

Maybe Taylor can do something about gas prices.

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landownerPermalink Reply by E & E on July 31, 2009 at 6:28

Parker,
Im going to give a shout out to Taylor on that one. Hey Tay how about $6.00 mcf? That sure would cut my cost payout time.
Earlene the barefooted one

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