Replies to This Discussion

Permalink Reply by Noah D. on June 27, 2011 at 5:08am

thanks, I appreciate the reply

Permalink Reply by DKinPA on July 26, 2011 at 9:25am

Matt,  thanks for the advice..... I do appreciate it!  You guys have been down these roads before and we do appreciate your help.   I did edit the post.  Right or  wrong I was not really worried about it for 2 reasons:

1)  Landowners who think that $3000 and 15% is the best that can be had need to see actual higher targets and set their thoughts on that rather than the one being proposed by the gas companies.

2)  By setting our target # now in no way locks us into an agreement on that.  You and I know that the market can bear more and it is truely underpriced.  When it comes to negotiating the final numbers the only thing that matters is leverage on 2 sides.....how much land we have and how much they want it,,,,,,we are growing and they are wanting

Permalink Reply by DKinPA on July 26, 2011 at 9:15am

BCLG UPDATE 7-19-11


We had a great meeting last Thursday with more acreage added to the group! For those that were not able to attend, we gave updates regarding the push by Shell to acquire more lease holdings in our area. Their current offer is $3000/ acre with a 15% gross royalty.  In addition it was concluded that our target was well above the current offers.  To jump into a gas company favored lease at these numbers is premature.

Our tactics to reach our goal will be:

1) Continue to work with Shell on both the lease as well as the monetary aspects.

2) Work with Rex, Chevron and Exxon (as well as any others that wish to throw their hat into the ring)
to create a competitive market for leasing in our area.

3) Acquire additional information to support the value of leasing in our area.

4) Continue to grow our group. We have grown and will continue to grow, which makes items 1,2 and 3 much
more effective.

On that note, I will be meeting with both Exxon and Rex this next week and hope to set up another meeting with Chevron soon. The truest determination of the value of a product or service is through the application of "fair market value" and nothing achieves that better than competition!

Thanks to some digging by one of our members, who discovered that the data from the seismic testing could be available for a fee. I contacted the company that is handling the data conversion and analysis and yes it would be available in September at a rate of $2700 to $4000/ linear mile depending on the density of the area.. This is a 2D study and will only show what is directly below the sensors. If we were to purchase a few miles of this data, we would need to hire a geophysicist to analyze the data, but it could be an investment that would yield an excellent return for us as a whole.

We continue to advocate patience. Up to this point things moved very slowly, but now activity is picking up and will continue to do so. With this increase in activity will come more lucrative offers. Landowners jumped at opportunities just 3 weeks ago, signing prematurely at $1500 and 15% net and now look where those offers are.....what will be on the table 2 weeks or 2 months from now????? As long as we stick together we can achieve the lease that meets our requirements as set by the members of the group.

Permalink Reply by Sam Douglass on July 28, 2011 at 3:56pm

I am not sure you need to spend the money.  If the companies are there, the pickings are good.  And you can bet they are better than the Texas Barnett where they have been paying $5000/acre for 5 year leases with 20% royalties.  Of course you know it is not just the Marcellus which thins as it gets to B County, it is the Utica, and maybe the upper devonian [ohio] shale -  and believe it or not they're saying the Onendaga limestone just below the Marcellus "shows good promise" with the same kind of horizontal drilling and fracking techniques.  the news keeps getting better and more and  more of the action is in PA.  But they can not do 100 tears worth of drilling all at once so it may be a while before the big money comes to Butler County.  Meanwhile your properties will be tied up and of limited usefulness for anything else.    Landmen come in waives offering one price, and coming back again and again until they have sewed up every piece.  There is nothing wrong with accepting a little less up front money if you conclude the properties will not be operated for 20 years - but stick with the highest royalty you can get.  The royalty does not require it to lay out cash until it is actually making money.  

By the way, the companies are publishing the fact that their costs, including land costs [what they pay you] are only about $1/ mcf.  If gas sells at $3/ mcf they can scrape by.

Permalink Reply by jb379 on August 1, 2011 at 9:43am

Sam,

 

Please provide the source for the published information about companies stating their costs are about $1/mcf.  I would like to read up on this and have not seen such publications.  Thank you.

 

JB

Permalink Reply by Sam Douglass on August 7, 2011 at 1:17am

I had not saved the sites so I had to wander around the Internet a bit to find the info.  I remember one company claiming costs under $0.80 / mcf but I could not find it.  The companies seem to speak in terms of Marcellus, but the savings are much greater when they get into the second and third strata like the Utica, Upper Devonian and Oriskiny,  At any rate the info you wanted is below.  Perhaps you can find more.

http://news.guidechem.com/2011/04/02/12967.html

Chemical News

Two early shale gas movers say they are prospering in lean times

Time:2011-04-02

After hearing two days of industry doom and gloom over low US natural gas prices, two early shale producers told a conference in New Orleans Wednesday that low development costs and booming volumes are allowing them to prosper in what are lean times for many. 
Fayetteville shale first mover Southwestern Energy and Marcellus pioneer Range Resources both said they remain profitable because they are selling more gas that they were able to find and develop at a low cost as a result of being among the first in the plays. 
Southwestern CEO Steven Mueller said his company plans to drill 400 more wells in the Fayetteville this year and said the companys production cost of about 86 cents/Mcf are falling because of technology and more experience in shale drilling. 
Part of the reason Southwestern can be a lost-cost producer is that the company does its own hydraulic fracturing and has had a good record in finding gas in the Arkansas play. 
We can drill a well $300,000 cheaper than our competitors, Mueller said. Armed with its success in the Fayetteville, Mueller said the company is turning its attention to Pennsylvanias Marcellus Shale, where it has 173,000 acres in play. 
Those wells are so strong, we dont even have to put them on compression, Mueller said of his companys wells in northeast Pennsylvania. 
Southwestern has 40% of it gas hedged at a 2011 average price of $4.20/MMbtu and anticipates prices of $4.50/MMbtu by 2012. 
Were going to have a very successful next two years, no matter what the gas price is, he said. 
Range Resources had a similar story to tell attendees at the Howard Weil energy conference. 
The Marcellus was performing so well, so beautifully, CEO John Pinkerton said, thats whats going to drive the company. 
Ranges all-in cost for Marcellus gas is less than $1/Mcf, he said, adding that like Southwesterns, its continuing to fall. 
If the Marcellus isnt the best shale play out there, Range Chief Operating Officer Jeff Ventura added, then its one of the best. 
Range spends $4 million/well in the Marcellus and expects to raise production from 200,000 Mcf/year this year to 600,000 Mcf/year in 2012. 

---

Disclaimer: This site reproduced the contents of the source indicate the source, is reproduced for the purpose of passing more information does not imply endorsement of their views or confirm the authenticity of its contents.

 

 

http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/6955568

Two early shale gas movers say they are prospering in lean times    New Orleans (Platts)--30Mar2011/356 pm EDT/1956 GMT 

 

After hearing two days of industry doom and gloom over low US natural gas prices, two early shale producers told a conference in New Orleans Wednesday that low development costs and booming volumes are allowing them to prosper in what are lean times for many.

Fayetteville shale first mover Southwestern Energy and Marcellus pioneer Range Resources both said they remain profitable because they are selling more gas that they were able to find and develop at a low cost as a result of being among the first in the plays. 

Southwestern CEO Steven Mueller said his company plans to drill 400 more wells in the Fayetteville this year and said the company's production cost of about 86 cents/Mcf are falling because of technology and more experience in shale drilling. 

Part of the reason Southwestern can be a lost-cost producer is that the company does its own hydraulic fracturing and has had a good record in finding gas in the Arkansas play.

"We can drill a well $300,000 cheaper than our competitors," Mueller said. Armed with its success in the Fayetteville, Mueller said the company is turning its attention to Pennsylvania's Marcellus Shale, where it has 173,000 acres in play.

"Those wells are so strong, we don't even have to put them on compression," Mueller said of his company's wells in northeast Pennsylvania.

Southwestern has 40% of it gas hedged at a 2011 average price of $4.20/MMbtu and anticipates prices of $4.50/MMbtu by 2012.

"We're going to have a very successful next two years, no matter what the gas price is," he said. 

Range Resources had a similar story to tell attendees at the Howard Weil energy conference. 

"The Marcellus was performing so well, so beautifully," CEO John Pinkerton said, "that's what's going to drive the company."

Range's all-in cost for Marcellus gas is less than $1/Mcf, he said, adding that like Southwestern's, it's continuing to fall. 

"If the Marcellus isn't the best shale play out there," Range Chief Operating Officer Jeff Ventura added, then "it's one of the best."

Range spends $4 million/well in the Marcellus and expects to raise production from 200,000 Mcf/year this year to 600,000 Mcf/year in 2012.

--Bill Holland, bill_holland@platts.com

 

 

http://www.palmertongroup.com/pdf/Marcellus_Production_Type_Curves.pdf

 

Dugan said Chesapeake was averaging initial production rates of 3.5 million cubic feet a day through 30 days on its Marcellus horizontals, with estimated ultimate recoveries of 4.2 Bcf. “Our budgeted drilling cost is $4.5 million a well,” he revealed. “That gives us a finding and drilling cost of $1.28 an Mcf.”
Chesapeake’s goal, Dugan added, is to reduce drilling and completion costs to $3.5 million. Already, he said, it has lowered drilling-cycle times from 40 days to about 20.

 

 

 

Natural Gas Royalties and Chaos Theory  http://oilprice.com/Energy/Natural-Gas/Natural-Gas-Royalties-and-Ch...

 

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