Seismic Survey Payment

recently got a letter from a company called TGS wanting to do seismic surveys on our leased property. Anyone had experience with this and any pros/cons? They offered us $5 per acre which sounded really low but I have no idea. Any input would be greatly appreciated.

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Permalink Reply by john on March 16, 2015 at 1:04pm

ACTUALLY, THE ONLY SURE WAY TO FIND THE QUALITY (NOT QUANTITY) OF GAS IS TO FRACTURE AND THEN DO THE LAB WORK.  3 WELLS DRILLED THAT WERE "COOKED" GAS , I SUPPOSE TOO MUCH PRESSURE AND ONE SUPER DUPER ONE ALL WITHIN A FEW MILES.  NOW THERE IS ANOTHER ONE DRILLED AND FRACTURED AND THE DRILLER IS CROSSING HIS FINGERS THAT THE GAS IS GOOD.

IMAGINE DUMPING SEVERAL MILLION BUCKS IN A HOLE NOT KNOWIWNG IF THE INVESTMENT WILL PAY BACK. 

Permalink Reply by Craig Cooper on March 16, 2015 at 1:31pm

john,

Lab work is good and in many cases 'best' but for what you describe (i.e. 'cooked' gas / thermal maturity) you don't need to drill / fracture / do lab work. 

A great deal of information about Marcellus (and Utica) thermal maturity is available and can be used prior to spending a ton of money. Some of the small / mid-size operators may not want or have the resources to do the analyses, but it can be and is being done successfully by the larger operators.

Permalink Reply by Joe Bezel on March 16, 2015 at 4:48pm

Craig,

I agree completely with everything you have said in this post. It makes sense that with the huge investment CHK and others are pouring into these wells, they spend some money to make sure they can exploit the play fully and efficiently. When we were approached by TGS, we met with their agent and a landman from CHK to discuss conducting such a survey on our farm.  The CHK landman told us they would like us to allow TGS to conduct their 3D survey.  Even though we had a nightmare experience with the criminal enterprise formerly known as Global, we were willing to allow the survey to be done, if they would agree to repair damage to our fields.  The $5 per acre was not a factor for us in any way; we would allow them to do it for free IF they would agree to repair any damaged areas.  They would not agree to anything binding, nor would CHK agree to subcontract them so our oil/gas lease language would protect us.  Thus, no agreement.  When CHK drills this unit later this year, they will be flying blind, because nobody will step up and take responsibility.  All we wanted was someone to say, "if we break it, we'll fix it."  Clearly, if we signed with TGS, and they rutted up our fields (a bicycle could rut them up right now), we would be on our own. With all the money being sunk into wells and infrastructure, I can't understand why this is an issue for them.

By the way, thanks for the link. It very clearly illustrates the value of these surveys.

Permalink Reply by Craig Cooper on March 17, 2015 at 3:43am

Joe, 

Thanks for the note. FWIW, not all companies operate per your description above. The 'if we break it, we fix it' philosophy is led by the O&G company sponsor of the seismic program. We always agreed to repair damages that we created.

Permalink Reply by Mike h on March 17, 2015 at 1:57am

Craig,

You should read more carefully. We have already been drilled and in production.

They have been such putzes on a raft of other issues that we have zero incentive to be "nice" and give them information about other strata which they have no rights to. That doesn't mean we would have agreed regardless but we would have considered it if they had played straight with us on other issues. Let me repeat, they do not have any rights to other strata under our property. Our royalty income does not depend on them having data for other strata. The only benefit they get from having that information is in negotiating with us (to our disadvantage) if they want to lease other strata.

Permalink Reply by Craig Cooper on March 17, 2015 at 3:51am

Mike,

I understood what you wrote and I still stand by what I said.

Even if you're already being produced, there are field development operations to be designed & implemented and there are important decisions about possible options to be made that will depend on the quality and completeness of (all) available data / information. If you limit data quality and / or completeness, you reduce the quality of the outcome. 

Permalink Reply by Mike h on March 17, 2015 at 4:16am

Craig,

They can have the data they are entitled to - and not one byte more.

Perhaps if CHK didn't act like a bunch of putzes people would be more amenable to working with them as partners instead of viewing them as adversaries.

Permalink Reply by Craig Cooper on March 17, 2015 at 5:02am

Mike, 

I really do understand. But, again regardless of the operator, IMO you're hurting yourself in the long run. 

Allow me to play devil's advocate on this for a minute... and then I'll drop it.

What real difference does it make if they have seismic data of the entire geologic section if they can't drill, complete or develop in anything above / below the Queenston-Pt. Pleasant-Utica zones?

Unless you have a large contiguous piece of acreage / mineral rights (i.e. >320 acres, chances are they'll skip you. That isn't optimal for them, but they can operate just fine without you. They'll just move on.

Your acreage will be an information black hole while your neighbors' acreage will be covered with HD seismic and lots of useful information. Any future work will be performed on their acreage at the expense of yours. 

Just food for thought .... 

Permalink Reply by Mike h on March 17, 2015 at 5:42am

Craig,

You really don't understand or you wouldn't be continuing to argue.

You are assuming a few things:

1) That the only interest a landowner has is getting drilled and getting royalties. We didn't need the money from this and it hasn't made a difference in our lifestyle. We could have signed directly with CHK but instead decided to go with the SURE group to get better landowner protection (and it turned out well that we did), leaving 6 figures of incremental signing bonus on the table to do so. We knew that if we didn't have a lease we would get force pooled by CHK. My wife's family has been in the area going back to Western Reserve times.

2) You assume that we care if we are skipped by CHK. The answer is no, we don't care.

3) You mention "lots of useful information" but you conveniently leave out the other part of the equation - to whom is the information useful?

4) You ask what difference it makes if they have seismic data of the entire geologic section? This can be answered in one of two ways (depending): If it doesn't make a difference then it doesn't make a difference. And if it does make a difference (to them) then they should be willing to pay more than $5 per acre for the data and not have a contract that is extremely one sided. If I came to you and offered you a contract that allows me to pull all your teeth for compensation of $5, you would laugh at me.

5) You wrote: "That isn't optimal for them, but they can operate just fine without you". We can operate our lives and our property fine without them or the activity. I'm not against drilling but I am against companies that think they can do whatever they want regardless of the terms of the lease.

Permalink Reply by Craig Cooper on March 17, 2015 at 6:15am

Mike,

I'm sorry if I gave the wrong impression.

1. & 2. did not assume that to be the case

3. I know the information would be immediately useful to the owner of the seismic data, in this case CHK et al. I assumed the information would be ultimately useful to you because it would improve the safety and effectiveness of any operation that may be conducted on your property on your behalf, either now or in the future by any operator

4. & 5. I'm glad that these things don't matter a whole lot to you. I was actually just trying, albeit unsuccessfully, to help out. The $5 / acre & associated terms of the seismic permit are to compensate you for temporary access to your surface. They've already leased minerals and per terms of their agreement have access to the subsurface. I did assume that if, as you say, you aren't against drilling that you'd want the (any) operator to have what they needed in order to not only maximize your $ return but also to enable them to conduct their activities in a way that would minimize the impact on you & your property as much as possible.

I didn't want to open a can of worms or make this exchange contentious, so if I did I apologize.

Permalink Reply by john on March 16, 2015 at 7:09am

ITS THE GOING RATE.  CHANCES ARE ALL THEY WILL DO IS RIDE BY IN A TRUCK AND DO MEASUREMENTS, AND/OR PLACE SOME RECORDING DEVICES ON YOUR PROEPETY. 

IN THE RIDE BY THEY WILL BE INTRODUCING SUBTERRIAN POUNDING TO MAKE MEASUREMENTS.

Permalink Reply by Mike h on March 16, 2015 at 7:46am

Actually John, they are doing 2 mile by 2 mile grids and using explosives, not trucks. According to what was told to me, the explosives will be placed in a hole drilled 30 feet deep. The sensors are placed every 200 feet.

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