re: Haynesville Shale

This still doesnt really make much sense. Shreveport regional is a small regional airport and when you fly private every airport seems small. To each his own I guess

Anyone know if the well was a hit or not? Is it too early to tell?

State Law requires that production to be in "paying quantities" to maintain a lease. I'm sure that is what you are hitting on. Small amounts of production is what many landowners are upset about in North LA. An operator takes over an old well thats life cycle is depleting and holds leases in a speculative way to drill or produce a deeper horizon.

This is perfectly legal, but very non-favorable to landowners in an area like DeSoto and Caddo Parishes. There are some cases in where landowners signed leases years ago for $200/acre with 20% royalty. The well has produced for over 10 years and the landowner has not made as much money as they would have made off a bonus payment of $5,000/acre.

A lot of landowners are concerned about bonus payments when they should be concerned about royalty. A lot of landowners in North LA aren't experienced enough to realize the economics behind it. The difference between 20 & 25% royalty is much greater than $2,000 to $5,000/acre bonus. People see the bonus money and automatically scramble for it.

If I were in your shoes I would hope that the Haynesville plays get closer to your area. If they are, then if you have a good royalty under your current lease it WILL get drilled and you could make good money that way. If it isn't near you then the only recourse you have is to hire a good oil & gas attorney to write a letter to the operator requesting the lease be released in whole or only keep shallow rights. It's a long-shot that they will comply, but if the attorney would recite the Mineral Code then you may get them to squirm.

small amounts of production is right! i get a check for 0.25/month for 40-60 acres on a well that is 30+ years old. i'm not really worried about the bonus but am worried about the royalty amount which was agreed upon by family members in the 70s.

Hasnt happened yet. Expected to be at least double that amount. Will be known middle of August.

rubeedoo:

It's market economics. The leases on most of the Cotton Valley wells that are producing were thought to be valued in the $200-$250/acre range. You are 100% correct that new market forces have opened up the Haynesville Shale and new leases are being negotiated at a much higher bonus and royalty. These people are just plain lucky!

And understand that the lease you signed 10 years ago probably had language in it that stated the lease could be assigned in whole or part and as long as production or operations were conducted on the premise then the lease would be in force and effect.

What would happen (usually) if an operator wants to explore for "deep-rights" within an existing lease is two things. The lessee, which is the lease holder, can assign the "deep-rights" (ie. below the Cotton Valley) or all of the rights to the developer for a fee. That fee is usually an overriding royalty interest. That would decrease the operators revenue and not change the landowners portion. Another option is to enter into a Joint Operating Agreement for that land and develop the acreage together where the partners split cost and revenue at a predetermined rate.

My grandmother has property that has been producing since 1935 @ 1/8th royalty, which is the state minimum. I've seen large landowners with this same fate. Most though are extremely wealthy from the production from the 1930's.

It's just the name of the game. If you can prove that a lessee is holding a lease for speculative reasons, that is cause for lease termination. The burden of proof is on the landowner not the lessee.

My family has about 10-30 acres in Bienville Parish and have been getting natural gas royalties for meany many years.

A land man recently told me to find out who the contracts were with to determine the depth of the rights. He mentioned this because apparently the Haynesville Shale is a lot deeper than other finds up there. He mentioned that some leases only are valid down to a certain depth.

Is Bienville Parish anywhere near the Haynesville Shale and what do you know about the depth issue and contracts?

I'm trying to help my family determine if it's worth looking into. Thanks in advance!

quote:

---

An exhibit to our lease which overrules conflicting language in the lease states, in part:

The term "oil, gas and minerals" as used herein shall refer to liquid or gaseous hydrocarbons only and then only such hydrocarbons that may be produced through conventional oil and gas drilling and production methods."

Is the drilling and production of shale formations (e.g., horizontal drilling and other techniques for drilling and producing from shale) considered conventional oil and gas drilling and production methods? Or would this provision exclude shale production?

I did find a definition from a USDOE site:

Conventional oil and natural gas production: Crude oil and natural gas that is produced by a well drilled into a geologic formation in which the reservoir and fluid characteristics permit the oil and natural gas to readily flow to the wellbore.

---

Hate to revisit this but the MyOilPro site says:

"Haynesville shale oil and gas production is "unconventional." Conventional production is that produced from sandstone, limestone or dolomite reservoir rock, typically from a vertical wellbore. Unconventional oil plays include oil shale, the Canadian tar sands and Venezuela's super-heavy oil. None of these are pumped to the surface; other techniques, such as mining and heating are required to extract the oil. With the Haynesville shale, getting the gas out in commercial quantities will require horizontal drilling, a very expensive process. Wells cost in excess of $8 million each!"

Every site on the 'net refers to gas shale as "unconventional gas".

So can shale gas production really be considred "conventional"? Really?

The fact that the well bore is directly embedded in the shale (source rock) and not a sandstone,limestone,"et al" trap makes it an unconventional play. Because of the composition of shale (porosity, vertical fracturing,permeability,etc),unconventional means have to be used to induce production(stage fraccing,horizontal drilling,etc).It's way more complicated than that(drill speed,balance),goes on and on. Tertiary recovery is unconventional production (co2, thermal,chemical injection)and that stuff is pumped to the surface.I guess anything that you did'nt see in "There will be Blood" is unconventional.I see a lot of mincing going on.