Replies to This Discussion

Permalink Reply by Bob Jenness on July 3, 2012 at 7:15am

On this subject, let's not forget that those accused of "trading" and "speculating" have also created a futures market for commodities (including NG)  Range Resources is telling its investors that it has its production hedged (using said futures markets, we presume) at $4.  Any lease economics should be analyzed using the futures market prices for the timeframe in which the lessor PLANS to achieve PRODUCTION.  That would take the wind out of the "gas prices are too low" refrain from the landman's song, I think.

Permalink Reply by Berk on July 14, 2012 at 5:23pm

petei,

Wife and I took a ride out to pettis towards meadville, then took a right onto Lippert rd, went past the Lippert farm and drove clear out to 173 but found no rig. What road are they drilling on?

thanks

berk 

Permalink Reply by Berk on July 14, 2012 at 10:44pm

Randy,

We will try it again tomorrow.

thanks

berk

Permalink Reply by Sam Douglass on June 30, 2012 at 12:41pm

Maybe ??????    Why are the Utica, Barnett etc. etc. poor relations to the Texan's Barnett V????

Barnett shale does not come close to multiple productive strata in Appalachia and their proximity to market BUT

Texans are willing to pay Texans more for their stuff for some reason.

The 6% ers cannot even get the offers up to $5,000/acre and 20%; even with their closeness to and understanding of the industry.

It’s time to give the non-experts a try to see if producers might be willing to pay landowners more than prevailing offers.                  See:

http://blogs.star-telegram.com/barnett_shale/lease_forms/

Lots of fascinating stuff including different sites about leasing in the column on the left.  Try clicking on various items like:

Berkeley Ryan  place lease at 25% royalty as well as other neighborhood leases

See if you can find under lease offers:

 

2009 for Barnett Shale:  “Under the agreement, property owners would have received a lucrative lease bonus of $27,200 per acre and a 25.25 percent royalty, the lawsuit states.”

Read more here: http://blogs.star-telegram.com/barnett_shale/lease_offers_tell_us_a...

 

See:  http://www.star-telegram.com/2011/09/10/3354113/barnett-shale-leasi...     late 2011

While still well below boom-time levels, leasing activity is still substantial as gas producers try to selectively piece together prime lease positions.

A total of 26,474 new mineral leases were filed in Tarrant County in the first eight months of this year. And untold thousands of property owners throughout the 22 other counties in the Barnett are still seeking either to sign a lease for the first time or to sign a new one after their first expired.

Neighborhoods in south and southwest Arlington are evidence that the leasing game is far from over. That's true in no small part because the area has some of the Barnett's biggest-producing wells, especially for Oklahoma City-based Chesapeake Energy, the No. 2 Barnett producer.

For Chesapeake, "Arlington is a big focus," because wells there have been "highly productive," said Julie Wilson, vice president for urban development and the company's top executive in Fort Worth.

"It's in the southern part of Arlington where we have the best growth opportunity," Wilson said.

The two biggest gas-producing wells in the Barnett have been Chesapeake wells in southern Arlington. The kingpin is the White South 1H well, in southwest Arlington, which produced 534.7 million cubic feet of gas in September 2010 -- enough to supply 8,150 homes with gas for a year, based on American Gas Association data.

Hoyer is among numerous homeowners who had a lucrative lease but hasn't received any royalties from gas production. He and about 800 others in a group called United Neighbors signed leases in December 2007 with Dale Property Services, acting on behalf of Chesapeake Energy.

The deal provided an attractive bonus of $15,850 per acre and a 25 percent royalty, with a two-year option to renew at the same bonus level.

Read more here: http://www.star-telegram.com/2011/09/10/3354113/barnett-shale-leasi...

 

See – for a lot of stuff on the Barnett:

 

http://www.webcrawler.com/info.wbcrwl.301/search/web?q=barnett+shal...

Permalink Reply by Jim Litwinowicz on June 30, 2012 at 5:01pm

Sam; every lease mentioned in your post was from 2008 or earlier. The economy was booming and nat gas prices were five times higher then. Companies were much more willing to pay more then. Also both the Barnett and the Hainesville, which were the darling plays of the time, were much smaller in acreage so companies had to compete for a much smaller pie. And in the production of the White South H1 well you posted, the numbers work out to nearly 18 million cubic feet/day...much higher then even the best Marcellus wells. And the Barnett is close to the refineries in Texas with lots of infrastructure. All this added value at that time.

Further, the Marcellus was just getting going, the Utica, the Eagle Ford, and other shales were not yet proven. Now there are over 20 shale plays that hold tens of millions of acres (if not over a hundred million acres) that all compete for leasing dollars. There are even gas-bearing shales being explored all over the planet. Ask too much and they can just go elsewhere.

I would love to see you non-experts get $20,000 or even $10,000/acre. Imagine the economic impact of 50,000 acres at ten grand each. If you get even $5000/acre and a 20% royalty, I will buy you a dinner.  Maybe my taxes would go down. :-) But I fear raising those expectations will just lead to disappointment.

Permalink Reply by matthew h mcsparren on June 30, 2012 at 7:38pm

Jim: Please post the Barnett shale production numbers you speak of. True the price per mcf was a lot higher in 2008, However production numbers in central Pa. come very close to the Barnett mcf per day. ( 12-15 mmcf per day.) Range and Seneca have both achived  those production rates, and Range sold out  their intrest in the Barnett, and National Fuel Gas ( Seneca ) sold their intrest in the Gulf Of Mexico production to invest in Lycoming and Tioga counties, Along with several other compines, including Shell. This is dry gas production area, ( pipeline ready ). The same as the Barnett Shale as I understand, So that would make the Texas refineries a non factor, Also the infrastucture in Pa. is alot closer to the end user then Texas, When most major pipeline companies charge a compression and transportion fee.  However my area of expertise is in the Pa. gas field, Would be happy to discuss with you infrastructure in Pa. Has your company done any leaseing in the central Pa. area?

Permalink Reply by Sam Douglass on July 1, 2012 at 10:01am

Some interesting points.  I might add that in addition to the Appalachian gases being closer to market and saving transportation costs that

In Texas, as near as I can tell, only one shale was leased - Barnett.

In Appalachia it is a smorgasboard with Marcellus, Utica, Onandaga etc. [even shallow gas and all the leases try to get coal bed gas.

A lot of the gas has significantly higher btus [heat value]

Cheaper to drill than many places and with multiple structures to develop - no additional cost for additional layers.

Wet gas, at least the ethane, has to go some place to get a fix.  Unbelievably they are now carting the stuff down to Texas (in pipelines no longer needed to bring gas to the NE) and processing it there.

The wet gas looks so good that at least a couple of companies are building billion dollar plants [if they can just get started].  The mouths of those new plants will be extremely hungry when they are complete and should be pleased to get some of the supply from NW PA.

Operators have learned how to operate more efficiently in Appalachia - recycling waste water etc.

New facilities will not be as leaky as the old ones - less line loss and more efficiency in brand new plants.

If you are going to build and operate plants, it is much more pleasant in Appalachia, not quite the heat and humidity of Houston, and we have nice forests, fair hunting and fishing, a collection of culture etc. - very livable if they manage to keep the pollution under control.

Permalink Reply by Jim Litwinowicz on July 1, 2012 at 10:19am

Matt; the numbers I posted was just the result of basic math using the well that Sam posted. Divide the Sept numbers he quoted by 30 to get a daily average. And since this discussion is about getting huge leasing dollars for leasing in Crawford, the well production in NE Pa are not relevant. The best well in W Pa is the Cheeseman at 9.5 MMCF/day, AFAIK,  roughly half the well that Sam posted.

And what the companies are after in Crawford is Utica wet gas which requires huge expenditures in processing facilities and pipelines that we don't have. And the finished products of wet gas that are used in manufacturing cannot be further utilized here they must be shipped to where such industries are located. Hopefully, many of these end users will re-locate to our area in the future but for now those transportation costs affect what leases are offered.

Permalink Reply by Linda A on July 1, 2012 at 10:48am

it was in the news not too long ago about a multi-billion 'cracker plant' being built just outside New Castle area - will utilize 10k men to build and will employ 10k when completed.  Is this the type of facility to which you are referencing?

Permalink Reply by Jim Litwinowicz on July 1, 2012 at 11:06am

That article was about the proposed Shell cracker plant in Monaca along the Ohio River. It is one of the plants necessary to process the ethane separated from the wellhead gas into ethylene. They have yet to make a final decision to build and have stated it may be two years before they make a final decision. They basically gave the state a bank draft with a 2 year expiration date.

There are many other facilities necessary to process the gas. There are several fractionalization plants on the drawing board. CHK has announced one for Columbiana Co, Oh. that will cost $900,000,000. I hear that EQT will build one in Butler Co. Rumors are of one for Venango. There is already one in Houston Pa off of I79 that is constantly being expanded. Add in the cost of pipelines, power lines, water and sewer lines, roadways and what else is needed to make these fully functional and that is a lot of investment by these companies needed to make the gas fields profitable.

There will also many be large compressor stations, dehydration facilities, and more things that I am not aware of. Huge investments that affect what they can afford to pay landowners.

Permalink Reply by matthew h mcsparren on July 1, 2012 at 11:35am

Jim; In Venango and Clarion county their are four stripper plants in operation, not very expensive to construct. Fluid is trucked to West Virginia for processing. Propane and Butane are where the profit is made, the issue is getting the Ethane processed, that is where the Shell plant comes into play. Six months ago NGLS were selling in the $60.00 per barrel range, today $ 40.00. Six more months$20.00 range? Overproduction of NGLS will make the price drop the same as natural gas did. Crawford is some what limited as far as infrastucture, But projects are in the works for Crawford, Venango, and Mercer.

Permalink Reply by Sam Douglass on July 2, 2012 at 10:34pm

http://shale.typepad.com/marcellusshale/initial-producti

There are always better and worse wells but this one does not sound too bad.  A present value of $10.6 million for a well 3742 feet long [less than a mile drawing from less than 100 acres, maybe 50 acres] should support a decent bonus.  

500 X 3742 / 43560 =

Initial Production

02/23/2012

Range Resources Designates Portion Of Marcellus Shale As "Super Rich"

Range Resources (RRC) has anointed a portion of the company’s Marcellus Shale properties in southwestern Pennsylvania as “super rich” due to the high BTU content of the production stream. The company estimates that the natural gas stream of wells in this area will have a minimum 1350 Btu.

Range Resources has 570,000 net acres located in southwestern Pennsylvania and estimates that 125,000 net acres are in this “super rich” portion of the Marcellus Shale.  One recent well completed in this area had an initial 24 hour production test rate of 6.4 million cubic feet of natural gas and 1,266 barrels of liquids per day.

Range Resources has drilled and completed eight wells into this area and has released an estimated ultimate recovery (EUR) of 305,000 barrels of natural gas liquids, 95,000 barrels of condensate and 3.9 Bcf of natural gas per well.  

Range Resources estimates that once in development mode, the cost to drill and complete a “super rich” well will average $4.7 million. The typical well will have a lateral length of 3,742 feet and fourteen hydraulic fracturing stages. The well is estimated to generate an internal rate of return of 95% using the current strip and a net present value of $10.7 million per well.

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