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Message
re: Haynesville Shale
Posted on 6/5/08 at 3:29 pm to Tiger JJ
Posted on 6/5/08 at 3:29 pm to Tiger JJ
quote:
I didn't understand the $200K figure you gave earlier? Was that per well per year? Per acre per year? Per well per life???
$200,000 is the amount of royalties (25% assumed), that you could expect per acre over the life of the well assuming a) that the gas under there is the same as the well that was on the powerpoint slide and b) a natural gas price of $12/ Mcf. It's looking like that natural gas will be a lot higher than $12 in the years to come though...
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Posted on 6/5/08 at 3:30 pm to Tiger JJ
quote:
So you're saying 6-10 times more than Cotton Valley?
Could be. On the 200K of royalties per acre, that is over the entire life of all the wells in that section (could be anywhere from 20-50). Again, it is so early in this play these pieces of information are not really available yet. So, if you own 100 acres of land in the heart of the play and it turns out to be as good as advertised, you could potentially make 20 million dollars over the life of the wells in your section. If gas prices go higher as they are likely to do over the next 10 years you are going to make more than that.
Posted on 6/5/08 at 3:31 pm to TigerDog83
J-W drilled the well (oil and gas company, they lease under the name Cohort). The well was on the Rumbaugh's land, hence it was the J-W #1 Rumbaugh.
Posted on 6/5/08 at 3:33 pm to TigerDog83
I was asking what the "screened out when it was frac'd" meant? Thanks.
Posted on 6/5/08 at 3:36 pm to TigerDog83
Everything I have seen says Natchitoches Parish is right outside the line. How definite is the drilling areas and what are the chances of the line moving from say northern Natchitoches to central or south Natchitoches.
Posted on 6/5/08 at 3:37 pm to GeneralLee
quote:
I was asking what the "screened out when it was frac'd" meant? Thanks.
Oh, sorry. Most of the wells around this area today are low permeability (because all the easy stuff with high permeability has mostly been depleted), meaning they must be stimulated to flow. This is done with a "frac job". Sand is pumped with freshwater and sometimes some gel into the formation, and the well will then flow back the water and a strong gas flow will be induced. This is true of all "tight gas sands" and shales (such as the Haynesville). When the frac screens out, it means that the formation can no longer take the sand being pumped in, and you can accumulate damage to the formation. This can be a result of pump failure, poor rock quality, or putting too much sand in a zone. In this case, the shale was very thin and would not accept the frac, thus it screened out and the well was not economic.
This post was edited on 6/5/08 at 3:39 pm
Posted on 6/5/08 at 3:40 pm to TigerDog83
quote:
Everything I have seen says Natchitoches Parish is right outside the line. How definite is the drilling areas and what are the chances of the line moving from say northern Natchitoches to central or south Natchitoches.
Until somebody goes down there and drills a horizontal (Encana has one currently permitted), then we really won't know. Rumor is that Township 10 North is the cutoff, but at this point who can say.....
Posted on 6/5/08 at 3:42 pm to TigerDog83
Is it possible there are other formations even deeper than the Haynesville that we might be drilling in 20-30 years? How deep can you go before there aren't any formations left??
Posted on 6/5/08 at 3:51 pm to GeneralLee
quote:
Is it possible there are other formations even deeper than the Haynesville that we might be drilling in 20-30 years? How deep can you go before there aren't any formations left??
Not very likely in the area where the Haynesville is being produced. The only producing formations in North Louisiana deeper are the Smackover and the Buckner. These produce to the North around the Arkansas stateline and into Arkansas, and have been heavily drilled since the 1940's. Once you get below that, you are in Paleozoic rocks, and thick layers of salt known to drillers as the Louann salt.
Posted on 6/5/08 at 3:56 pm to TigerDog83
TigerDog, do you mind me asking who you work for, or are you self-employed?
Posted on 6/5/08 at 4:11 pm to LSU0358
I work for a family company, so technically self employed. I know a lot about this play due to our interests in it (I'm not going to go into that) and I'm happy to share what I know without giving away any confidential information. The only other recommendations I would make to people wanting to become involved in this thing is to buy stocks in the companies participating in it. I own positions in Petrohawk and Chesapeake, and have seen incredible returns off of these stocks in the last couple of months. Others have done well in Goodrich, Exco, Penn Virginia, and others. Wall Street really has only begun to price the Haynesville value into these stocks. They are going to increase in value tremendously if the play ends up being as good as advertised. I know that Petrohawk thinks that this play could be worth more to them than they are currently valued. Energy trading isn't for everybody, but this could end up being one of those "once in a lifetime" events for a particular sector, as well as the entire region of Northwest LA.
Posted on 6/5/08 at 4:21 pm to TigerDog83
Figured it might be a smaller independent. I get a lot of info from my brother because he's in it up to his eye brows (not with interest in wells, but working for those that have it). I'm leaning more toward buying Chesapeake rather than Petrohawk (the management at Petro seems a little off sometimes).
If anyone is looking for energy companies to invest in, also keep your eye on those involved in the Bakken play in the Dakota's. This one has potential to rival some of the Saudi oil fields.
If anyone is looking for energy companies to invest in, also keep your eye on those involved in the Bakken play in the Dakota's. This one has potential to rival some of the Saudi oil fields.
Posted on 6/5/08 at 4:24 pm to TigerDog83
quote:
Well, most companies are quietly assuming 5 BCF of gas (Billion cubic feet) plus per well on 60 acre spacing (So about 7-8 wells per section of land). With gas trading today around 12.00 per MCF, each BCF is worth approximately 12 million dollars at todays prices. Assuming again 12.00 per MCF gas prices, and a recovery of 45-55 BCF per section (Per Petrohawk) that is 600 million dollars plus in revenue per section to the oil/gas producer. Take out 7-8% for state severance taxes, and multiply that by a royalty amount of 25%, and you get about 150 million dollars per section to the landowner (royalty owner). This will vary by section and location, and of course gas prices themselves vary, but it would not be surprising to arrive at around $200,000 per net mineral acre in royaties over the next 20-30 years.
83, I hate to pester you, but can you make this a little more clear. I'm confused between "sections", "spacing" and "acre". How big is "one section"?
Also, do you think Shreveport-area lawyers are conflict free in assisting landowners, or are they in the pockets of the big companies?
Posted on 6/5/08 at 4:33 pm to Tiger JJ
A section of land is 640 acres. These deeper gas wells (like the Cotton Valley and Haynesville) are mostly drilled on 640 acre units (Chesapeake might try for some 1920 acres units from what we have seen though). Each unit is composed of mineral owners who are pooled into a group and receive payments based on what percentage of the unit they own, and whether they have leased or not. If you own 640 acres in one section, you own 100% of that unit for example. These wells will be drilled probably on 60 acre spacing, meaning one well for every 60 acres of land. That would equate to about 8-10 wells per section of land. Each acre refers to net mineral acres, same measurement as surface lands. As far as lawyers here, most are probably not going to assist you unless you have a large spread of acreage. As for those who are making money by taking a percentage of either bonus or royalty for negotiating (Argent comes to mind), people should NEVER use them. Never let someone make money to only negotiate for you. The lawyers who were working oil and gas prior to this boom are probably the best bets for contacting.
Posted on 6/5/08 at 4:50 pm to TigerDog83
Thanks for all the info!
Posted on 6/5/08 at 5:02 pm to TigerDog83
Speaking of lawyers, I heard there was one in Red River Parish that put together a pretty large group of land owners and set up a sealed bid. He received a $5M commission - not bad for about 30 days of work. I understand that he also represents or represented one of the oil companies active in that area as well.
Posted on 6/5/08 at 5:04 pm to DandyPimp
quote:
$5M commission
Upfront? It's not predicated on actual success in drilling for the gas? Damn!
Posted on 6/5/08 at 5:36 pm to Tiger JJ
It is upfront because his commission was based on the lease bonus not royalties.
Posted on 6/5/08 at 6:03 pm to DandyPimp
What do you figure that works out for lease revenue per acre?
Posted on 6/5/08 at 6:39 pm to Tiger JJ
Petro Hawk is still taking out full page ads in the paper to sell investors. It smells.
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