Time frame

Just had permit issued for my property in Wva. My question is there a time frame for the oil and gas companies to start drilling before the permit runs out?

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Permalink Reply by Little Cougar on November 26, 2011 at 5:24am

Here in PA a permit is good for one year. Usually means they are getting ready to drill within the year the permit was issued because these permits for horizontal wells are expensive.

Permalink Reply by john t neil on November 27, 2011 at 1:54am

LC I read where you have wells that are on line already. I am in northern part of Wva. just outside of pittsburgh. I was wondering what kind of production you was grtting out of those wells?

Permalink Reply by Little Cougar on November 28, 2011 at 12:34pm

US

The permits for the 2 wells that I am receiving royalties for were issued on 9/10/10 and I received my first royalty check in October of 2011retroactive for April, May, June, July, and August,  2011.  The royalty check is usually 2 months behind.  My royalty check I received in November was for Sep...so that should give you an idea in Greene Cty PA of what is happening.  The O&G is EQT and they aren't wasting any time...they have most of all the old leases and are going to town.  We might not get the big bonus lease signing checks but the old leases did require modifications so there was room for negotiation.

LC

2s72s0k9mm8gdPermalink Reply by 2s72s0k9mm8gd on November 28, 2011 at 1:28pm

Cougar you are proof that the "Held By Production By A Shallow Well" boogyman ain't all that scary after all! The signing bonus is nice but look who is getting her royalties first. Your experience gives hope to alot of folks in the same situation!

Permalink Reply by Paul Martinelli on November 28, 2011 at 2:03pm

LC....would you share what you were able to negotiate on the old lease?

Permalink Reply by Jack Straw on November 28, 2011 at 2:31pm

LC,

I too would appreciate it if you would be so kind as to detail some of your experiences in negotiating modifications to an old lease. I believe that this would be of interest to many.

Congratulations, nice to hear that your checks are coming in.

JS

Permalink Reply by Little Cougar on November 28, 2011 at 4:59pm

This is to Paul and Jack and john t neil and Glenn you are such a champion...As I said in previous posts, these current wells i have royalty rights but did not have executor rights because of the way the estate was worded and I only had 1/5 th interest in the acres that were included in the unit so therefore, I was not part of the negotiating. 

As to production, it is more then enougth to make 15 relatives comfortable and we had the largest percentage of acres in this unit (total unit is 606.2 acres).However, I own more then another 100 acres that EQT is interested in modifying the old lease.  So far, I have not had any final discussions...and I was the last to hold out.  They are anxious, and even willing to pay a small upfront bonus.  When I have a better idea as to what will be agreed upon I will be glad to share but I don't want to shoot out of the side of my mouth yet.  I don't want to give any false hope and don't want to show my cards online as I know they read this too.  But as Glenn said, HBP is not necessarily the evil stepbrother.  There are a lot of positives, the infrasture in already there, the roads, the pipeline, and they know that gas is in them "thar" Greene County Hills.  EQT is growing by leaps and bounds and are taking advantage of the HBP.  The Cooper wells that are producing massive amounts in PA are EQT wells...this will give John t. Neil an idea what production can be.  However my wells are doing well but not that well.  All I can say is that the royalty checks are very nice and I can live now and not worry.  Paid off my debt and can relax.  And more wells to come in this same unit.  Maybe I was not greedy enough...but I am content and will live my senior years without the stress.  I thank God every minute of the day...why he blessed me...I will not question.  Got a feeling my grandmother is looking out for me...God Bless her sweet soul.

Also been doing some research as to the decline rate on these Marcellus Wells, and they have adjusted it...apparently the decline right is not as sharp as previously thought...time will tell and the wells should pay royalties for no less than 40 or probably 100 years.  I was reading today that they can do something to stimulate the production when it starts to decline...Interesting!

lil cougar

 

Permalink Reply by CL on November 28, 2011 at 3:49pm

does anyone have any information on what to expect as far as royalty payments go.....how much for how long?

Permalink Reply by Jack Straw on November 29, 2011 at 6:31pm

For those of us without a Marcellus well, our focus is upon wondering if/when we will get a well(s).

For those who get a well(s), their focus is upon wondering what the well decline curve (their royalties through time) will look like.

 

Me, I am ever curious; while waiting to see if/when I will get a well(s), I ponder upon what the decline curve might look like.

 

As I try to search out information on Marcellus well decline curves, I find a lot of “opinions” and anecdotal information, but very little in the way of concrete knowledge.

There seem to be a number of good reasons why I have had little success in finding meaningful decline curves:

The drilling and production of the Marcellus Shale is still in its infancy. Decline curves are a plot of production versus time. There has not been enough time to accumulate enough data to arrive at a generic decline curve.

Also, the respective O&G operators are loathe to release production information; releasing only that minimum information required by law, and releasing it no sooner than required by law. The longer the O&G operators are able to retain production information as proprietary, the longer they can use this information to their competitive advantage.

And, the O&G operators are still learning how to best maximize production; how long to make the horizontal legs, best fracing fluids, best proppants , ideal number of frac stages, etc. It should be expected that production efficiencies improve over time, as the operators gain experience. Tomorrow’s decline curve for a given spot may be different from today’s decline curve – as technology improves.

To complicate matters further, it is reasonable to expect that different areas of the Marcellus will have very different decline curves.

 

Different operators doing different things in different areas (while at the same time changing how they do what they do as a function of time) and releasing as little information as possible. Looking for a decline curve is like playing “Where’s Waldo?”.

 

It is likely that difficulty in finding a Marcellus decline curve can be attributed to the reality that the O&G operators are still trying to figure it out; with an expectation that we will find that different areas of the Marcellus will have different decline curves.

 

What I do think I know:

In spite of current (painfully) low natural gas prices, activity in the Marcellus Shale continues. In spite of low natural gas prices, the O & G operators seem to be able to recover their sunk costs very quickly (typically in two years or less).  One (veer) crude way of estimating royalties might be to multiply the number of horizontal wells drilled in your unit by $4 million (average horizontal well cost). Then reduce this number by multiplying this number by the decimal percentage of your royalty.  Then reduce this number by multiplying this number by the decimal percentage of interest in the pooled unit. All this arithmetic gives an estimate of proceeds from the first two years. It is anyone’s guess as towhat will happen after that.

 

It seems as though new shallow gas drilling has (for the time being) ended; though shallow gas wells are much cheaper to drill, they simply are not currently economic – not when contrasted against the economics of prolific horizontal Marcellus wells.

 

I have read where the Marcellus well decline curve is very steep, 50% of the natural gas ultimately produced will be produced in the first two years; the remaining 50% produced over the next eighteen years – do not know whether this is true, seems quite pessimistic with regards to the outlying years. However, fearing that it might be true, it cautions that any new found wealth should be treated as semi-transient (and thus used wisely).

 

I read one place where it is likely that the operator will re-frac the well after around four years of production. Elsewhere, I read where it is likely that the operator will re-frac the well after around fourteen years of production. About the only thing that I learn from this is that it is likely that the wells will some day be re-fraced.

 

Perhaps the best advice is to simply enjoy the ride.

 

All in my humble opinion.

One size fits most.

Consider this free information worth every penny you paid for it.

 

JS

Permalink Reply by gary smith on November 30, 2011 at 2:36am

i have to compliment jack on his posts. very clear headed and easy to understand. thank you.

Permalink Reply by Little Cougar on November 30, 2011 at 3:47am

Thanks, Jack.  I think you are on the money...its a guessing game now...no concrete info just opinions by so called different experts. I agree that you should treat your new found wealth wisely.  Put it away if you can and live as you have.  I paid some debt off, like my car...and some home improvements...the rest is put away.  Who knows, I may live to be 100 so this has given me an opportunity to build up a retirement nest egg that the market took from me in 2008.  Just like you...I research and read everything I can get my hands on and its too soon to tell what will be. MHO...all the land that has been leased by the big boys...they are going to wait until the price goes up for natural gas and there is not such a glut of supply...and then they will start drilling like crazy. Just MHO.  In Greene Cty...EQT is one of the smaller companies...with hopes of becoming a big boy.  I have no complaints though...this is a windfall...something I never counted on so I will not look a gift horse in the mouth.  I can't beat these big companies...and they know it...so they give a little to make me happy and frankly, I am very happy.

lc

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