Replies to This Discussion

Permalink Reply by Lynn Wigglesworth on January 4, 2012 at 2:26pm

My understanding is that the Tenneco pipeline is at capacity, and they are putting in a larger pipeline next to it. Shell's pipeline from the individual wells to the Tenneco pipeline isn't done yet, so many of the wells they already have aren't producing yet (which areas of Tioga Co. are actually getting royalty checks??). And the price of natural gas is still WAY down. I think all those things together are slowing progress. The 3D survey teams are back in Delmar township, so at least something is happening.

Permalink Reply by M - on January 4, 2012 at 4:16pm

Shell jumped through hoops to get all the properties leased including purchasing leases owned by Senica. It seems strange after that it went dormant. Some property owners have been approached with pipeline plans and blueprint locations for wells that were supposed to have been completed in 2011 and never started. It should be interesting in the upcoming year. Most new contracts dont allow lease holder wells.   -M

Permalink Reply by Lynn Wigglesworth on January 5, 2012 at 1:26am

"don't allow lease holder wells"...do you mean the leases don't allow drilling? From what I've seen, Shell has worked out exactly where they want the wells, so they allow 'no drill' or 'no surface operation' leases in the areas where they don't intend to drill. Remember, a drilling unit can be 640 acres, or a lot more with the newer leases, but they only need a few acres for the actual well pad, so there's little or no surface disturbance on most of the land in a unit.

Permalink Reply by M - on January 5, 2012 at 5:33am

Lease holder well is a term used by the gas companies where they drill a vertical shaft to the desired depth and cap it to hold the lease. This is a loophole to hold old expiring leases with out re-negotiation or loss of land to competitors. This would also apply to any land in the pool under the old contracts. Old contracts did not pay the royalties the new contracts pay and some were only purchased in the 3 figure per acre range. Most new leases will not allow this. I believe 640 is an average size pool.  I agree The actual well when completed needs very little space. The hard part is when they are drilling, but its worth it in the end. I am not against a well on the land. To respond to your comment about Shell knowing about locations may be true but they are not telling the lease holders where until they drill. It would be nice to know what the projections for the year were....  -M

Permalink Reply by Lynn Wigglesworth on January 5, 2012 at 8:04am

There are vertical wells holding leases all around me; I just never heard it called that before...we call it HBP (hold by production), and Shell's new leases DO allow it. No, Shell doesn't let anyone in on their plans. We have a vertical well nearby that was drilled several years ago (one of the early test wells) and has been sitting there, capped, ever since. They formed a unit around it in 2010, but haven't done anything with the well yet.

I have a new lease with Shell (just signed in September 2011). The new Shell leases allow units up to 1280 acres, but since my neighbors' leases all restrict it to 640, that's what units around here are sized. The bonus Shell is offering today isn't as good as my neighbors got (from East) in 2009. I think they got the same 15% royalty that Shell offers today. I guess I should have signed back in 2009 when my neighbors did, but all in all, I'm happy with the deal I got.

Permalink Reply by M - on January 5, 2012 at 5:35pm

The old contracts I was referring to were done in 2005 or before. During 2007-2008 time frame East backed out on some contracts because of lack of funds to back up offers. Also 15% is correct, there was some reports of 17%.  2005 was less.

At this point I will reserve comment on the rest. Certainly this is not the place to discuss contract legalities or drill processes.  

I have been through Antrim recently and seen the pipeline work along with the wells .... impressive at most. I also understand there is a pipeline currently being built in NJ that will meet with the PA lines. (Hearsay mostly).    -M

Permalink Reply by Ann Ticopa on January 6, 2012 at 7:48am

I doubt that lack of major pipeline capacity is a factor in getting individual wells hooked up.  Both the Tennessee Gas 300 line and The Empire Tioga County Extension were appoved about a year ago and work is well under way.  SWEPI put in a gathering line connector to the Empire TCE at state line in 2011.  (Not sure it's all done, but the section that goes by Jobs Corners is now covered.)  Since SWEPI and Talisman are obligated to use the TCE, I assume SWEPI has or will hook up the horizontal wells closest to this trunk line.  But, already drilled and fracked horizontal wells further from the line will continue to wait.  

Understood that people who whose $50/acre T/BR leases are hbped by a single horizontal well are impatient to see some real (royalty) money.   But I don't understand why (some) landowners who did get a good bonus are eager to sell their gas at a bargin-basement price.  Two years of full out production and it's 75% gone. 

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Permalink Reply by M - on January 6, 2012 at 8:22am

Interesting point! We were told a good well would last 10+ years. if this is true, the wait is a better option. The leases are good for 5 years, if no work is done before that the leasing processes start all over again so you would think they would want to drill before that.

Still it would be nice to see a well prediction for the 2012 year. Senica does it why cant Shell?   -M

Permalink Reply by Ann Ticopa on January 6, 2012 at 10:28am

Of couse it depends on how a well is operated - full-bore vs throttled back - but shale gas wells have a sharper initial "decline curve".  You can Google for more information.  One example:

http://www.oilandgasevaluationreport.com/2010/03/articles/oil-patch...

Imo, well financed companies like Shell will continue to drill and shut-in wells to hold leases.