Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on October 6, 2009 at 8:08

Yes JNP, S 6 is a CHK unit application. But S7 to the immediate south is a Fossil unit. It is quite possible that Fossil has made a deal to vacate their unit order so that CHK can make application for it. It is quite helpful to post pre-conference notice letters for HA Drilling & Production Units as that is often the earliest definitive indication of an interest to develop. Rumors must be taken with a dollup of caution but unit orders are of public record.

Permalink Reply by JeffNParis on October 6, 2009 at 8:37

Skip,
One of my relatives has the docs but I do know it's the section to the immediate south of S6...just south of Springridge. I don't remember if the letter noted CHK or not....I think it was from some lawyers in Lafayette.
Jeff

Permalink Reply by Skip Peel - Mineral Consultant on October 6, 2009 at 8:50

JNP. That's why it is important to post a copy of the notice letter.

Permalink Reply by JeffNParis on October 7, 2009 at 4:57

Skip,
I know that prices are down and that there is debate as to when they will go up. But is anyone making money yet on the Haynesville? Once a well comes on line, are they pulling the gas out or are they holding back til inventory decreases and prices increase? Once things 'normalize' - if there is such a thing, do you think the recent Excel worksheet posted showing royalty payouts with Haynesville decline rates is on target for what one could expect to receive? The number for year 1 is the largest, of course, but won't that number diminish over the year as the well depletes month to month?
Thanks for any light you can shed on this. I don't see a whole lot yet about people making money....I'm assuming it's a bit early in the play for that - or people just don't talk about it.
JNP

Permalink Reply by Skip Peel - Mineral Consultant on October 7, 2009 at 5:17

JNP. Every company has different Finding and Development costs(F&D). Speculating on profitability, IMO, is a waste of time. Clues lie in the quarterly reports by the publicly held companies but I do not spend much time trying to analyze them. I think that all the companies with significant stakes in the HS Play are focused on the future. And I don't necessarily mean the price of gas. It helps to think of this phase of the Play as "building the assembly line". The well pads, roads, gathering systems, treatment facilities, compressor stations and long distance transmission pipelines that are constructed with the cash flow from current production will support the development of the field for the next 30 to 40 years. These capital improvements are an investment in a long term commitment to the HS. I haven't reviewed the spreadsheet that you mention but if it indeed accurately incorporates the generally accepted decline values for the HS it should be a better tool then the other on-line royalty calculators that do not use the correct decline curve.

Permalink Reply by Henry on October 6, 2009 at 12:32

Hey Skip,
Isn't 15N,15W now fully unitized? This makes the second township to have applications filed in all 36 units. And, the awesome thing about it (if I'm right), is that ALL 36 are Chesapeake. Are my notes on this one right?

Permalink Reply by Skip Peel - Mineral Consultant on October 6, 2009 at 12:41

Henry. I show no unit applications or orders for Sections 16, 19 & 25. So my total is 33. Fossil holds the orders for Sections 2-5, 7-9 & 17. The remainder are CHK.

Permalink Reply by Spring Branch,mineral owner on October 6, 2009 at 17:58

Skip, I don't dispute your records for unit applications/orders for 15/15, but I show that Sections 3,4,7,8,9, & 16 are Fossil sections. Section 2 has a CHK operated Haynesville well producing to sales; Section 5 has a CHK permitted well; Section 17 has a CHK operated well awaiting pipeline. Fossil has a CV well in both Sections 10 and 16. Are you sure that CHK has filed Haynesville unit application for Section 10? That would certainly be good news as far as I am concerned!

Permalink Reply by Les Bamburg on October 7, 2009 at 0:22

Henry, there are 34 units all operated by Chesapeake with only Section 19 & 25 not unitized.

Permalink Reply by Henry on October 7, 2009 at 1:21

Thanks to all for the corrections. My bad. Apologies to all.

But is is pretty awesome to think Chesapeake locked up 34 out of 36 sections (so far) in a single township.

Permalink Reply by Skip Peel - Mineral Consultant on October 7, 2009 at 3:05

One of the earliest HA unit applications was by Fossil Operating Inc. on August 28, 2007. The application covered 16 additional Drilling & Production Units for the Haynesville Formation, Reservoir A in the Johnson Branch Field. The application included Sections34,45,36 in 16N - 15W, 2-5, 7-10, 17 & 18 in 15N - 15W and Sections 10-12 in 15N - 16W. I have a copy of the application plat. There are a number of HA units where the company awarded the original order is not acting as the operator. Mainland Resources is another good example as they have been discussed on the site on numerous occasions. You will find Petrohawk wells in units to Mainland and Samson Contour. Though there is no public notice that I have found, I believe that a company may vacate an existing order in favor of another company as there have been a number of occasions where a section is under existing unit order at the time another company makes application for the same section. Thanks for the heads up on Section 16, Les. What docket was that app included in?

Permalink Reply by Les Bamburg on October 7, 2009 at 13:55

Skip, try Docket #07-985 on 8/28/07.

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