Replies to This Discussion

Permalink Reply by Brian Day on August 1, 2010 at 4:31am

Nancy Thomas's comment a day ago about the Phenox rig pulling off of the Cummins wells in Chatham Township after drilling 4 of 6 wells has me curious. it seems like bad or desperate business for a drilling sub-contractor to pull off of an established pad with 2 wells to drill yet when their equipment is already on site and set up. (I am only speculating here and totaly uninformed.) Even if the contracting company, East, is not willing to pay a higher fee demanded for the other two wells, it would seem wise business to finish the job at hand to avoid hard feelings in future negotiations for the drilling of many future wells in the area. I figure the fee for driling the Cummins wells should have alredy been contracted or at least negotiated, so what really happened? I would think that removing an existing rig from a site and moving in a different one and starting over for two wells would be more expensive than paying the fee to the already located drilling rig from Phenox. Maybe East is in arrears in payments to Phenox and Phenox simply pulled out to avoid East's building a further dept. How many rigs does East have in the county able to drill horizontal wells? Smaller rigs for vertical wells should be cheaper and more plentiful, but they don't bring big acerages into production. Vertical wells set up big, unfair units. Contoled acerage looks good to the people at Shell, I'll bet. Shell probably has thrown some money at East, but is it all spent between executives and outstanding debts? Creditors and contractors with outstanding debts against a company get happy and go to work often when payments resume, but has the payment faucet begun to dry off again? Are the gravel suppliers and haulers eeing steady cheques? It seems to me landowners are the first to see a lag in money for well fees and pipeline fees etc. Is this happening? East could actually simplify their life in many areas and bring wells into production very soon by ponying up a fair market value in a few key spots, but they are not doing this. Maybe they are not doing it because they do not have the cash.

Permalink Reply by Lynn Wigglesworth on August 1, 2010 at 6:06am

Brian; excellent summary and questions. I, too, was wondering if the drillers pull out because they weren't being paid. Two years ago, East couldn't even pay for leases they agreed to; where are they getting all the money for drilling? Is it all smoke and mirrors and juggling debt?

Permalink Reply by Ann Ticopa on August 1, 2010 at 6:17am

Imo more likely reallocation of resources in line with Shell's plans rather than shortage of $$. East had contracted for a seismic survey of Rutland Twp to be done this spring/summer. Sometime after the surveryors went through and marked the shothole locations, but before they were drilled, the access and other flagging tape and stakes disappeared. I'd be surprised if it wasn't Shell that made the call to cancel at least part of the survey.

This is 100% speculation on my part, but I wouldn't be surprised see Shell divest itself of some of the East leases. Like Talisman did when they sold their less promising leases to concentrate on their core holdings.

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