Replies to This Discussion

Permalink Reply by ken hatcher on September 30, 2009 at 14:08

Go figure, with what they have done with older units.

Permalink Reply by Skip Peel - Mineral Consultant on September 30, 2009 at 14:30

ken. Here's what I figure. Early on Encana/SWEPI had no reason to move quickly to develop their leasehold in the southern reaches of the Play. There was no competition and their leasehold was relatively early in its initial terms. Encana was already beginning to accelerate development in the last few months when Chesapeake basically pulled out of much of the northern reaches of the Play and landed in their back yard. Now let's see where Petrohawk spends some of their new money. The Hawk's got a credit line problem so I'm betting that it can choose to compete in the eastern expansion (North Red River/Bienville/east Bossier/Webster) or the southern (far south DeSoto/Sabine/Natchitoches) but not both. If it chooses south the competition could get heated. At this time I'm thinking they get more for their money in the east. If you were the Hawk would you use your limited capital budget competing with ECA and CHK for leasehold. Or with J-W, Will Drill and Questar et al. This is an over simplification of the circumstances but Keith doesn't allow sufficient characters to do it justice in a discussion thread. It will be interesting to observe.

Permalink Reply by ken hatcher on September 30, 2009 at 16:32

Good logic, i think soon you can add comstock though they are more deliberate. Also i have seen some O&G leases recorded for eog in sabine. Petrohawk's new money should be freed up about now, it will be interesting.

Permalink Reply by Henry on September 30, 2009 at 23:52

Skip,
A couple of months ago, HK was looking up unleased landowners in the southern areas and calling them all and making offers. Offers were in the $3k - $5k range with 25% royalty. Offers were non-negotiable. I don't think many landowners took their offers. (In my case, they never called back after I declined.) Landowners in the south seem to be demanding higher prices and getting them.

Permalink Reply by Skip Peel - Mineral Consultant on October 1, 2009 at 2:10

Henry,

Leasehold competition always benefits land/mineral owners. The reason you are seeing improved offers, IMO, is directly related to Chesapeake's latest development activity. It will benefit those in areas targeted for near term development ( ~ three years). However without an increase in demand and price for nat gas and additional competition it will not recreate the summer of '08 effect of wide spread premium offers. Keep in mind the undrilled, non-HBP inventory for the major shale players is still quite large. They will be cautious to avoid situations where new leases can not be drilled within their primary term.

Permalink Reply by Cheerleader on October 4, 2009 at 18:47

Henry,
What is the current range of acceptable offers in the southern part of the parish and or what are owners holding out for per acre???

Permalink Reply by Henry on October 4, 2009 at 23:47

Cheerleader,
I cannot tell you what is an "acceptable offer." That's entirely up to you. However, I've seen offers of up to $5500/acre with 25% royalty. Keith posted that number on the Sabine Parish Group. I have no idea if this was in the southern part of Sabine or not. I suggest you contact Keith and ask him.

Aside from the up-front money, there are some very important items the landowner ought to include in a lease: vertical pugh clause, cost-free royalties, good shut-in payments, explicit language on what the driller may or may not do to one's land (and associated penalties), etc. Don't forget clean-up language. Someday these wells will stop producing -- you don't want your great grandkids to have to pay for removal. Read the various threads on this site about lease language, and decide which items are most important to you. Hold firm on those, and give in on some others.

Permalink Reply by Cheerleader on October 5, 2009 at 7:36

Thanks Henry,
I did see Keith's posting. I thought you may have an idea of what the mineral rights owners, in Sabine Parish, were thinking as to a general acceptable rate or range for a bonus. What is a good example of a good shut in payment? Based on a history of royalty payments or if the well is immediately "shut in" payments based on a percentage of the bonus?? Or just a specific dollar amount?? I appreciate your imput.
Thanks

Permalink Reply by Henry on October 5, 2009 at 10:09

Cheerleader,
To me, a shut-in payment is not a big deal. To others it is. I don't know a good value.

My thinking is this: If the driller shuts the well in, it might be because the price of gas is low, and he'd like to wait for prices to rise. That kind of shut-in is OK with me. What I don't like is the idea of being shut in for long periods, and then having the driller come back and produce some gas, and claim I'm still HBP. So you might want to figure out some language that says if you are shut in for a certain amount of cumulative time (3 years?) then some type of penalty kicks in. Maybe others on this site have better ideas.

Permalink Reply by joevic on October 1, 2009 at 5:52

What are the reasons for Chesapeake pulling out of the northern areas and moving into southern DeSoto and Sabine parishes? Do you feel this trend will continue? Thanks.

Permalink Reply by Skip Peel - Mineral Consultant on October 1, 2009 at 6:07

joevic. The details of the reasons are contained in the early 2009 discussions in the North Caddo Group. In general the first round of wells were disappointing in the sense that they cost as much to drill as HA horizontals south of I-20 but produced a quarter to a third at the time. Now that would be more like an eighth to a sixth although the last well at 7.5 mmcfd was improvement. Chesapeake can go anywhere in the play that they wish. They are gone. Other operators don't have that luxury and will produce north Caddo when nat gas prices improve.

This is my last post until Sunday evening. Headed to the mountains for a little R&R. Have a good weekend. Skip

Permalink Reply by Martin on October 2, 2009 at 4:15

Skip --
Is there an online data base of all unitized sections? I am interested in finding out and tracking the unitized sections in township 9N, range 12W.

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