Comment

Comment by myles fetterhoff on June 18, 2012 at 5:22am

http://www.marcellus-shale.us/Marcellus-Air-8.htm

Comment by myles fetterhoff on June 18, 2012 at 5:20am

Anyone know where the site in centerville in the pictures is located? Would this be a well site?

Comment by Bob Jenness on June 11, 2012 at 4:56am

Where are you finding 5% interest today?  You can buy Long term Treasury obligations at a 30% premium over face value and maybe get 3%, subject to risk of inflation, but that's a far cry from the deal you quote.  NG is selling in the $2s, and can easily be hedged in the $4s.  Furthermore the risk to the drilling numbers you quote is that further technology progress will push it down. I don't mean to imply that this is easy, but there's a new  economy out there, and we all have to be open and creative to learn how to benefit from it.  I do appreciate the facts on cost elements of the business, though.  Thanks for that.  I'd still like to hear your thoughts on the best real estimate of the value of the oil/gas per Utica acre at some nominal $/BTU value.  Why the easy posting for the E&P costs and reluctance on the value estimate?

Comment by Jim Litwinowicz on June 11, 2012 at 3:54am

Your asking for $50 mil upfront. Add in $6 to $8 mil per well.  It takes 8-10 wells to develop 1280 acres Thats another $50 to $80 mil.  Add in costs of pipelines, compressors, dehydrators, seperators, and more.  That gets you around $150 - $175 mil.  Take off 15% to 18% for royalties.  Thats $30 mil to $72 mil. All that cost involved with not knowing what the production will be, what the costs are over 20 yrs, what the price of the product will be, or what the regulatory environment will be.

Or put the $50 mil into some interest bearing account at 5%  You'll have roughly a $100 mil in ten years with no risk.

Comment by Bob Jenness on June 11, 2012 at 3:03am

Jim, I missed your May 28 post.  Had I seen it, I would have replied something like "A company who's big enough and confident that there's $200 to $400 million in gas and oil under that 1280 acres, which can be sold over the next 20 to 40 years to produce a reasonable return on that investment."  What's your geology perspective on those numbers?  Exxon is big enough, and I suspect they have estimates in that ballpark, but the confidence may take a year or two and/or a well or two.  China (Company name TBD) is also big enough, and probably has cash to do such an acquisition - it might be a better investment than dollar reserves:-)

Comment by Jim Litwinowicz on June 11, 2012 at 2:22am

Cx-Energy will be holding a meeting on Tuesday June 19th

Meadville Fire Department/Vernon Central Hose Company
16589 McMath Avenue

Comment by Jim Litwinowicz on May 28, 2012 at 3:30pm

Its not valid and here's why. For a 1280 acre unit, $35,000/acre works out to $44,800,000...plus the $6 to $8 million to drill a well plus the cost of all the supporting infrastructure ....tell me what company would even consider that.

Comment by Bob Jenness on May 28, 2012 at 2:23pm

And discussion is what I was engaging in, as you are:-)

The reason it's such a good discussion topic is that it's a real valid question.  I'll listen to any rational set of engineering and geology that provides an estimate and uncertainty bands for 1, 100, 1000, 10000 acre samples, but I don't see anyone with any real expertise willing to post same.  That would add to the discussion, don't you agree?  Absent that, I just read what's written and try to ask the right questions.

I've worked on some pretty complex contracts, and I've seen them done both all-on and all-under the table.  One is a negotiation, and the other is a poker game.  I like poker, but I no longer play at casinos where they can see my cards and I can't see theirs, even though they assure me that they don't use their CCTV to look at my cards:-)

Comment by Jim Litwinowicz on May 27, 2012 at 4:00am

The $35,000 is in the title of a thread on the main page, not this one. And it is a made-up number that someone threw out for the purpose of discussion. It has no basis in reality. They may as well as used $100,000.

What happens is that people see deals that Company A sold acreage to Company B for a said amount.  People do the math of dividing the dollar value by the acreage and then complain that the deal was for some high value like $20,000 acre.  But this is folly to compare because these deals are done after an area has been proven and includes producing wells, pipelines, and supporting infrastructure. The land has been aggregated and the titles certified. All this adds great value to the O & G rights.

Think of it this way....for $100,000 dollars you can buy everything you need to build a house....lumber, blocks, shingles, windows, drywall, electrical, plumbing, heating, and much much more.  But without the skills, tools, and work to put it all together all you have are large piles of material. After the house is built, the same materials are now worth $200,000 as a finished house.

That is much the same as comparing what an individual landowner with 75 acres gets in a lease as compared to a company selling a large, leased, and proven oil/gas field with existing infrastructure.

Comment by Bob Jenness on May 26, 2012 at 2:58pm

I didn't say I had an offer at that price, just that it was the headline of this thread.
Obviously everybody's parameters for time, $, etc are different, but I suspect we all want a fair deal with someone who will be a reliable long term player and payer. One of the risks that landowners take is that energy development will so change the 'hood that selling will be the only viable approach. I've received that advice a few times, and I'll carefully consider any such offer, with the qualifier that I have some surprisingly strong attachments to the land and a strong stewardship ethic.

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