Fracking your own property

Has anyone given any thought to having an independent company frack their property? I know there are professionals on these discussion sites who can demonstrate the whys and why nots.

I know with a lot of landowners not having their leases renewed maybe they can form their own coalitions to drill and sell their minerals w/o the O/G companies.

This should be viewed as a fun discussion.

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Permalink Reply by Frank Walker on June 10, 2016 at 1:40am

It's true there is pipeline everywhere.  There is, for example, a gathering line very close to my own property.  It was built and is controlled by the gas company.  If they allowed access by those who refused to sign their lease I would be shocked.  Doing so would serve as encouragement for (independent drilling) activity they want desperately to avoid.

The day any gas company facilitates independent drilling within its zone of operation will not soon arrive.

Mike MurphyPermalink Reply by Mike Murphy on June 10, 2016 at 2:49am

gas companies have been facilitating independents for years also other o and g producers sell into each others pipelines every day I am sure the bank would want prove you could sell your gas they were loaning money against.......this is the real world and no bank is going to loan millions on a hope they need to see you can pay them back

Permalink Reply by Frank Walker on June 10, 2016 at 2:51am

Not where I live.  Maybe for small time, shallow, stuff in the old days.  For Utica and/or Marcellus?  No way.

Mike MurphyPermalink Reply by Mike Murphy on June 10, 2016 at 3:19am

what ever you think Frank but not all gathering systems are owned by O&G companies  that's why the O&Gs are charging landowners for transportation cost they are using pipelines they do not own Williams company and markwest are not O&G production companies but they own pipelines  and they gather from many different companies production eqt buys from companies other then there own......could you imagine the pipeline cobweb if each company had there own pipeline exclusively for there gas only

Permalink Reply by Frank Walker on June 11, 2016 at 8:41am

I take your point, Mike, in event of third party, disinterested, gathering line ownership.  Such ownership does not exist where I live.  Here there is only one show, with everything (wells, lines, compressor stations, you name it) owned or controlled by the same gas company.  That's what prompted my analysis.  Before the Marcellus there was no NG development here.  That one gas company has built everything up from scratch over the last seven (plus or minus) years.  I doubt they would be welcoming of interlopers drilling in the middle of their carefully-developed patch.

Permalink Reply by bungalow_steve on June 10, 2016 at 10:17am

Too much risk to do a single well, no one would fund it. Companies/investors expect a certain percentage of wells to go bust, so you need a minimum of 100 or so wells before it's palatable.

Permalink Reply by Erik V. on June 11, 2016 at 5:32am

I work for one of the large drilling companies.  We drill Marcellus and Utica wells.  By the time we get done paying the landowner lease bonus, royalties, gas/oil transportation costs, fracking costs, taxes, wages, reclamation fees, permit fees, pipeline right of ways, etc. combined with the drastic decline rates of the wells (especially the Utica) we aren't sure at this point that many of the wells will even break even.  Why would anyone want to drill their own?  Take your lease bonus and your 12.5% to 20% royalty, kick back and be happy.

Permalink Reply by KAR on June 11, 2016 at 11:19am
To piggy back on your list, those costs are just the tip of the iceberg as well... Impact fees/severance taxes, state bonding costs, title costs (you think you own the minerals but it's crazy how often you don't or even share them), maintaining the well pads/wells, hauling costs, regulatory costs, surveying, environmental/well studies done during planning, permitting costs, etc.

A landowner would be crazy to take on personal liability for a well. Even the old vertical wells (or new for the matter). Unless you've been in the business you're going to be way in over your head. There are so many rules and regulations in place that by the time you paid for training and/or hired competent employees you'd rue your decision. Also what pipeline are you going to sell to? Just because there are pipelines in place doesn't mean anything - they don't have to let you sell into it. Also what if that pipeline nearby is for wet gas only and your well is dry gas? You're going to be paying a processing fee for nothing. How about compression? Impoundments, water sourcing? Geologic data?

Quick question... When drilling Utica wells, technically what formation is actually being targeted?

I know I'll get beat up for this but, I understand that some landowners think they deserve more and sometimes they do... However, without an oil and gas company to tap into your minerals they're basically worthless. Vertical Marcellus wells are out of the question. They are not economical and probably never will be so if you think you can just drill one on your property you're going to have a bad time. It's fine that you have a price on them but if all your neighbors are signed and you held out you're not going to get anything but watch them make money. If you live in a capture state where the first person there can claim right, they might be taken with no compensation. So sometimes something is better than nothing.
Permalink Reply by KAR on June 11, 2016 at 11:44am
I also forgot about plugging costs. You better set aside money while the well is producing because it's not cheap to plug even an old "vertical" conventional well. An easy well can cost between $15k-$40k and if you experience problems that number can quickly grow to over $150k. Now take those numbers and at least double/triple or quadruple for a horizontal well...
Permalink Reply by Erik V. on June 11, 2016 at 5:04pm

Thanks for adding a few more costs to the horizontal drilling.  You asked about the target formation for a Utica well.  It depends on what area that is being drilled but mostly we go for the Point Pleasant because it has a higher limestone content and therefore fracks better.  

Permalink Reply by Daryl Brown on June 14, 2016 at 4:29am

Amen Erik.

If this were such a profitable deal as all these folks seem to think then why are so many E&P's going bankrupt.  

When you have a simple mind and merely wait for the postman to deliver your check each month you tend to the think the world is a very simple place to live in when in fact it is extremely complex and risky.

I can only imagine the comedy of errors and missteps a  landowner group attempting to obtain permits, insurance, ROW, capital, knowledge and the list goes on and on and on that it takes to successfully complete a well and monetize the hydrocarbon it produces.  Even the smallest of companies have dozens of very skilled professionals doing all these complex and technical aspects.  

If however you are inclined then call a townhall meeting and organize your own E&P company and learn for yourself.  My prediction is you would quickly go back to watching for the postman each month..............  far easier.

Here's an idea for you......... instead of seeing an oncologist and spending all that money why not just develop your own cure for cancer............  seriously has anyone considered this..........Eureka

Permalink Reply by John Marshall on June 15, 2016 at 3:40am

Excellent remarks Daryl. The drilling and completion cost, expertise needed, regulatory cost and burden, marketing and maintenance all are formidable. And someone needs to be the decision maker. If there is a group or coalition of mineral owners, who has decision making power? Another consideration: the unconventional business is a law of averages game. One well is too risky. Out of 10 wells (roughly $50 million D&C cost, depending on depth and lateral length), 3 may be very good, 3 may be dogs, and 4 may be average. Or all may be dogs, depending on rock quality and drilling and completion technique. One more thing. If the mineral owner is a holdout, and all the offsetting owners have leased, how much land does the holdout control? All laterals are not created equal, and a lateral less than 4000'-5000' would most likely not be economic. Recommendation would be to lease to a good operator and collect your royalties.

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