Halcon sells Woodbine assets in Texas so they can keep lights on: they can't find a buyer for Big Dog known as Utica----woof, woof.

http://seekingalpha.com/article/2055743-halcon-resources-management...

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Permalink Reply by deer spotter on March 3, 2014 at 1:45am

Paul: Did D&L lease have a depth clause? Could it be that D&L did not own the Utica rights? This seems to be in line with what you are saying. I know they had the deep rights in Clarion  Co. 

Permalink Reply by Mark McGrail on March 2, 2014 at 7:51am

Paul,

What did your analysis show that brought you to the conclusion that the leases were worthless?

Permalink Reply by Paul Butler on March 2, 2014 at 9:01am

The details are proprietary to the client so I can't say.

I hate saying that. 

I sound like a Republican over age 70, i.e., the old "if you only knew what I know..." shtick. Then they never get around to telling you what they know that makes them so self-righteous.  Sorry Dad.

I can say all of the information in my report was gleaned from public records. A big part of the analysis concerned what else was available nationwide.  The clients were Bankers and all they care about is the bang for the buck on, at a minimum, a field basis.

Finally, once again, I've victimized myself with my own hyperbole.  It may have been an overstatement to say the leases were worthless.

The leases could have some re-sale value, especially when you factor in "the Greater Fool" phenomenon, which is quite real.

Permalink Reply by Mark McGrail on March 2, 2014 at 11:28am

Paul,

Thanks for the reply, and I appreciate the honesty.

My reason for asking is this, potential wells drilled on those lease could have economic viability, although not in the "gusher" category correct? So some company could find the area economically viable. It's a matter of perspective isn't it ?

The production numbers for the Hilcorp wells in Lawrence County aren't great but they are viable and will help pay for the infrastructure. Long term it looks like a profitable venture.

Permalink Reply by Samuel J. Orr on March 2, 2014 at 3:51pm

Mr. Butler: I trust Hilcorp more than I trust you. Whatever the geology Halcon over-extended themselves. There is no infrastructure available to much of their acreage in Mercer and Venango Counties. Therefore, it makes sense to sell some of these assets where there is no oil but where there may be decent amounts of gas. It also makes sense for them to drill assets where they know there is oil. Oil requires no infrastructure as trucks can transport oil from the well-head. The probability is that Mercer and Venango counties have good but not great geology. There may be oil in western Mercer County but going north into Crawford the geology seems to be worse. It may well be that in western Crawford the oil is of a high specific gravity and that current technologies have difficulty extracting it. Finally the Allam well in eastern Venango look to be a decent wet gas well. But there is no infrastructure. The gas is wet and too high in BTUs to be accepted by National Fuel. Halcon originally was thought to have a deal with National Fuel Gas which fell through because of the high BTU issues. How good Mercer and Venango Counties ultimately turn out to be, depends not only on geology but upon the development of infrastructure, which in turn depends on Supply and Demand and the price of Oil and Natural Gas. As better  and hopefully cheaper technologies are  developed, that fact alone may cause the price of wells to go down and production to improve. Better technology may also allow a higher percentage of subterranean Oil and Gas from wells that are drilled in the future. If the price is high enough, and the demand great enough, acreage that is now marginal may become profitable to drill. For the time being I agree that O&G companies generally have acreage with better geology and better infrastructure elsewhere. These companies have stockholders to satisfy and it makes sense to drill the best geology with the best infra-structure first. Finally, the Allam well was decent, even though there were supposedly multiple technical screwups in the design, the drilling, and possibly the fracking. Nobody knows for sure where the sweet spot of the Utica is, but I am encouraged that companies are still poking holes in the ground in Mercer County, if not in Venango. If Hilcorp can drill two decent wells in Sandy Lake Township, this will be a big plus. If the wells are duds, it will be not be good news.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on March 2, 2014 at 6:24pm

"Hilcorp people aren't real bright.  I think that's why they are happy."

I've sat i their offices and met with their team, Paul.  Dumb they are not.

Permalink Reply by Samuel J. Orr on March 2, 2014 at 4:20pm

To Summer Johnston and Mark McGrail: See my reply to Paul Butler of 20 minutes ago. He is a relative newbie to the site and all of his posts are quit  negative. Any information he acquired from public sources, he ought to share with us. I believe I  also recently posted a comment to the Mercer County Comment Wall that is my more concise analysis of where we are at present. He mentions D&L energy and relates that they had a hugh position in Mercer County and went bankrupt. I thought D&L had leaseholds that were in Ohio but I may be wrong. There is however a Mercer County in Ohio. I have been posting to the website for over 2 years and I just don't recall much being said about Mercer County, Pa. and D&L.

Permalink Reply by Samuel J. Orr on March 2, 2014 at 5:56pm

Oil is $102 / barrel. Natural Gas is $4.60 / 1000 cubic feet. One Barrel of Oil Equivalent (boe) of Natural Gas is is 5500 cubic feet. A boe of natural gas will currently fetch $25.30. The technology to drill Oil and Gas wells is the same. In some areas of the country a well may produce both. A company like Halcon that is highly leveraged, loaded in debt, and desperately short on cash must employ its entire drilling budget in areas where it believes Oil will be found in commercially viable quantities. Even large companies with strong balance sheets will have a much higher return on investment if they are able to drill wells that produce large amounts of oil. And Oil can be hauled away in trucks, where gas requires infrastructure. As large trucks are progressively converted to run on CNG and / or LNG, and as necessary refueling stations are developed along the interstates, the domestic demand and the price of natural gas should rise significantly. This will take time and there exists a chicken and egg problem. Who will build refueling stations until there are sufficient trucks to run on LNG or CNG? And who will build such trucks unless there are refueling stations /Fortunately it appears that there is existing technology that can allow a truck to run on Diesel or either CNG or LNG but likely not on both CNG and LNG.  (At current prices a truck would preferentially fill up with Natural Gas where the necessary fueling stations existed.) Additionally the price of Natural Gas in a number of foreign countries is currently $12 to $15 per 1000 cubic feet or $66 to $82.50 / 5500 cubic feet. 5500 cubic feet of Natural Gas equals one barrel of oil equivalent. If such prices can be fetched abroad,  domestic Natural Gas can cheaply produced here and profitably transported to coastal facilites where it can be converted to LNG and then shipped to various countries where it can be resold at handsome profits even when the costs to make LNG and to transport it are considered.) The construction of several coastal facilities have been approved to convert Natural Gas  to LNG, but many more need to be built. More pipelines also need developed to get the gas to the coastal liquification plants. Finally  there are needed sufficient ships with the necessary equipment to load, transport and deliver LNG to foreign countries.Thus there are many obstacles that currently hinder a much more intense development of the production of natural gas and also obstacles that hinder a large increase in demand for natural gas. Increased demand relative to supply is required to stimulate domestic production of natural gas. I believe that  all the obstacles  mentioned are of relatively easy solution, but unfortunately significant time may be required.

Permalink Reply by Mark McGrail on March 3, 2014 at 2:20am

Sam,

D&L did own leases in Mercer County, PA.

Permalink Reply by Summer Johnston on March 3, 2014 at 3:00am

To Samuel Orr:

My opinion has nothing to do with Paul Butler's comments. My opinion is derived from the fact that Floyd Wilson stated, during that conference call, that Halcon would not have a rig in the Utica this year. Really, it's not rocket science--no rig, no drilling. IF there is product down there and IF the companies can determine a better way to reach it, they'll be back. Kansas suffered the same fate: the companies decided the drilling wasn't economically feasible and left.

Sure people up in northern Ohio and in those PA counties want to believe they're sitting on top of a wonderful reserve. But look around: Consol--gone from Mahoning Co. in Ohio; Chesapeake--cancelling permits in Mahoning County, Ohio; Halcon--pulling the rigs from the area. Does that not send any message? Surely they wouldn't be leaving if the drilling locally was overwhelmingly profitable. Consol had a pad just outside of North Jackson. They reclaimed it, moved all the topsoil back and restored it.

Maybe Hilcorp is still permitting, but I haven't heard of any other gas cos getting new permits. No other drilling pads being created.

I only know what I see.

 

 

Permalink Reply by TM on March 3, 2014 at 10:22am

Halcon suspends Utica Drilling In Ohio and Pennsylvania.

http://www.ohio.com/blogs/drilling/ohio-utica-shale-1.291290/halcon...

Permalink Reply by Samuel J. Orr on March 3, 2014 at 12:46pm

I. do not disagree with you. All the companies seem to have better acreage to drill at this time. I think we are early in the game but I do believe gas prices will rise dramatically. I believe they were $13 / 1000 cubic feet one time during the Bush Administration. There is a hugh difference between the price per BTU of Oil and the price per BTU of gas. I think my comments look to the future but it may not be so far in the future. It will be interesting to see if pipelines continue to be extended in Mercer County. I cannot deny that things may get very ugly before the sun shines once again on Mercer and Venango Counties' when drilling will resume and when  checks  to landowners will fatten their bank accounts.

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