Replies to This Discussion

Permalink Reply by AT on October 10, 2011 at 9:44pm

I'm guessing most of that acreage is signed with 1280 acre drilling unit pooling clauses which was standard early on and many leases being signed still are today.

Permalink Reply by 015334grltd9m on October 10, 2011 at 9:56pm

Apparently, this is really how big this play is, yes THE oil industry can accomplish this and still have to import energy from the middle east, we consume so much.

Permalink Reply by Steven Gardner on October 11, 2011 at 8:03am

Thats something I've thought about too. A lot of those lease's are probably not to landowner friendly and could be HBP forever. The others would have to be renewed in 5 years. Their report said they plan to have 40 rigs in place by 2014.... you can do the math but I think they are going to be here a Looonnngg Time !

Permalink Reply by Utica Shale on October 11, 2011 at 9:01am

After 5 years they have the option to "re-lease" my land for another 3 years and pay me another Signing Bonus. I am OK with that!

 What if they only drill on 50% of the acreage (strategic patchwork) , essentially making the other 50% not leaseable to any other driller? And they take the full 8 years instead of 5 years? Then they only have to drill 10 wells per month with 40 rigs. That is very doable.

Permalink Reply by Steven Gardner on October 11, 2011 at 9:17am

A good PUGH clause would preclude them from holding the rest of the acreage by production and a good lease would get you paid for the extension. From what I've read it takes abt 18 months to complete a six well pad.. not sure abt bringing it all to production. I think they use a rig to drill vert then another rig to go horz then the frac company comes in. I seem to remember reading that PA has had abt 3300 wells drilled since it started up there abt 4-5 years ago.

Permalink Reply by Utica Shale on October 11, 2011 at 10:10am

If there ends up being a huge patch work of small noncontiguous acres of un-drilled land then how can a PUGH clause help you re-lease your land if your "island" is now too small for another Frac Well?

 

  Does anyone really think that all 100% of the 1,250,000 acres will actually be included in a drilling unit? I don't.

 

  Most of the FRAC wells around us have been a single vertical well and single horizontal section, so far. The wells near us are producing gas and oil within 5 months after the ground was cleared. Additional horizontal sections can/may be drilled later.

 

 It appeared that several different "crews" worked at the one site ...

 One crew cleared the land, made the road and prepped that pad area.

 Another crew drilled the vertical well.

 Another crew drilled the horizontal well

 Another crew frac'd the well.

 Another crew connected the pipeline.

 

 Even though one individual well may take 4 -5 months to come "on-line"  this one team of 6 different specialized crews can complete a new well every month.

Permalink Reply by Steven Gardner on October 11, 2011 at 10:35am

Gregory.. I continue to learn. A PUGH clause won't help you re-lease your land but it would give you the option. If they drill additional legs then its very possible that your excluded land could be included in the extended drilling unit. No.. I don't think all the 1.2 m acreage will be included in a drilling unit but I'm sure they would like to include it. Time will tell

Permalink Reply by Wayne Miller on October 13, 2011 at 12:20pm

http://dl.dropbox.com/u/31036030/Bustin%20owners.pdf This is an owner's list from a CHK unit in Bradford Co., PA showing that a 637 acre unit holds 1743 acres HBP. If this is an average then that would mean (absent any Pugh clauses in the leases) that it would take only 1289 wells to hold that acreage. This also does not take into account any non-contiguous property owned by these owners, if it is all on the same lease then it is all HBP.

Permalink Reply by Mickgyver on October 13, 2011 at 5:24pm

This is why Chesapeake has a pending deal to get another company or companies before the end of the year . Also to get you caught up with the last merger that Chesapeake did when they went with Enervest who is one of the largest producers of gas and oil in Ohio they now have 2 million acres at their beck and call . This is because of the extra 750,000 that Enervest brought with them .I hope this helps . Have a great day Mick

Permalink Reply by James Kerns on October 15, 2011 at 9:43am

I was given this scenario as a strategy, by lay out drilling units, using different specialized crews and rigs mentioned already here, mega O&G company moves in and drills one vertical bore and completes one horizontal leg, the unit is now held by production. Now they move on and continue to drill, oldest lease's first, so as not to have any primary terms expiring. They now can come back later to drill additional legs from said vertical bore's.

It will take awhile, but consider this.

As a landowner recieving royalty's it might be the best scenario.

You begin recieving checks based on the production from the well where your land is part of that unit. The production is based on one legs drain, and as initial production spikes begins to level off, they come back and drill one or more additional legs from that vertical. Now your income stream gets another big boost from these leg(s) initial production spike(s). In time all production levels off to sustainable levels and at some point will begin to decline, but as they were completed at different intervals, it's not a sudden jolt and decline to your income stream. Sounds good to me!

Permalink Reply by AT on October 15, 2011 at 5:20pm

James,

   I tend to agree with you, however, I disagree with thoughts that they will drill the oldest leases first before their primary terms expire. These are the leases that they have the least amount of money invested in. My belief is they will drill the newer leases where they paid big signing bonuses for and have the most invested in per acre first before the primary term expires so they ensure they don't have to pay those large amounts of money again to extend them. The older leases that the primary terms will be expiring first are the leases they paid peanuts as signing bonuses for and they will only have to pay peanuts to extend those leases. Even if it comes down to not exercising their option to renew and having to let some leases expire, they will let the old leases they paid peanuts for expire over letting leases expired that they have more invested in.

Permalink Reply by Steven Gardner on October 15, 2011 at 6:35pm

Sounds like a realistic scenario but I can't help but think geology will also play a role in when and where they drill as this play unfolds. Also .. moving rigs must be expensive so you would think if they plan on six wells on a pad they would drill all six verts while its on site.. but I know absolutly nothing about this industry.

AT.. I see your wearing Jed's hat now.. did you get some good news?  LOL !

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