I was just wondering if any one knows how long we can be locked in with the shut in royalties, Guess I am asking if they can just give me a small check at the end of every year till prices go up. There is a well ,but they are not producing it and with the lease coming due they have me locked in with shut in royalties.
I am a gas marketer and could perhaps shed some light on the shut in reason if you could tell me where the well is located and when it was drilled. The fact is that prices are not low in the region and have in fact been pretty robust over the past 6 months so I would expect there is another reason for why the well is shut in. There have indeed been times where gas prices in certain portions of the Marcellus have plummeted for extended periods of time but that has been quite awhile back. There are so many variables here that need to be sorted through that without more information it's hard to know just what you're dealing with here. It may be this well is shut in until gathering/transport space becomes available with some of the new pipelines etc and this may be alot of worry on your part for nothing. It could be as simple and just having to be patient while this infrastructure build out progresses and it is progressing no doubt.
Daryl That doe's make since because the well is in Tyler Co West Virginia , out where there is no pipe lines yet, what bothers me is the well is just a shallow well that was rumored to have been drilled to keep the leases shut in.
Very difficult to say actually. It could indeed be true that the well was drilled in order to hold the lease to avoid having to pay a renewal bonus. I'm not sure who the operator is but the pieces of this puzzle would probably come together very easily if I knew more of the particulars. One could then go pull the well permit and learn more plus you can quickly determine what is going on by just using a little common sense and a pinch of Sherlock Holmes. For example if you have leased to a large well known shale driller and they are the ones who permitted and drilled the well you can safely assume they haven't suddenly switched course and begun drilling shallow vertical wells. This makes no sense and the obvious answer is that at some point they will re-permit the well as a horizontal and then drill the actual Marcellus well that you are hoping for.
To say there is no pipe in Tyler Co is not true at all. Now there may not be the sufficient infrastructure (gathering and processing) in place to allow a well drilled from your location to be produced but take comfort help is on the way. It just takes alot of time to get these things done and capital allocation for these producers is critical. You can't be poking holes in the ground at $8MM a pop and then waiting 6 months to get the gathering and processing in place. That's a formula for bankruptcy.
You're in a great area just relax (although I know that can be hard) and stay vigilant. You can probably learn some things by viewing some of the investor presentations from whomever you are leased to try to gain a better understanding of development plans and timelines. In WV the processing build-out is the key as this is for the most part wet gas and will require processing and that takes time and capital and in many cases the producers are waiting on the mid-stream guys to get these plants up and running and expanded. MLPX is your giant processor in that area and there are others as well like Williams who may be involved in that effort. In many cases the producers are dedicated to specific midstream gathering and processing so if you know who you are leased to or who is the operator of the well then you can quickly discern where that gas will ultimately be headed once it is drilled and completed.
Stay the course my friend you are blessed to have minerals in that part of the world. God put an incredible amount of hydrocarbons there for our use and in time you will be rewarded.
The language of the lease is going to control. If there's no termination for the shut-in, it's most likely going to keep going as long as they want to keep it going. If that's not going to help you, you'll probably want to talk to a lawyer with oil and gas experience in the state the well/lease is located. Of course, if the company is keeping the well shut-in for low gas prices you might not want to complain too much. Low prices mean your gas is sold for low prices, and there's only so much gas in that well. It might be better in the long run to encourage them to keep it shut-in and sell your gas when prices are higher. It's up to you, of course.