How does Antero split the pie when Consol has acreage in their drilling unit?

The recently permitted Antero "Coal" unit in Seneca Township/Noble County, Ohio contains a little, or a lot of Consol acreage depending on what direction the laterals will go.   Early in the leasing days, the flippers, oil company reps and group leaders (like Krugliak, et al..) said the companies would "trade" acreage when required in order to make up drilling units.  Is this true?  Does anyone know how it works?

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Permalink Reply by Clinton44 on April 6, 2013 at 12:44am

Hiker,

It is possible that there are some lease assignments going on here, possibly Consol has brought Antero in as a venture partner in the drilling unit. Not sure how it works in Ohio, but I am sure it is similar to the lease assigments that went on in PA. as our units were formed and brought into production.

We are in PA we are leased with Anadarko. Anadarko is the well operator in the units that we are in. They assigned portions of our lease to Ultra and Mitsui they are all venture partners in the same drilling units and each pays us royalties relative to the percentage they have invested in the venture partnership. 

 

Permalink Reply by The Hiker on April 6, 2013 at 8:50am

Thanks Clinton.   Then the true answer may only come when the checks start flowing to the landowners in the unit; if they receive two checks, it would point to a joint venture, but if one check comes the real agreement remains murky.  This unit was permitted to Antero, but stretches across Consol property.   The orientation of many parcels hereabouts will require some sort of partnership, since Oxford (Eclipse), Antero, XTO and Consol all hold acreage intermingled with each other, none of which can be turned into units without crossing the others "turf".

Permalink Reply by Clinton44 on April 6, 2013 at 9:07am

Yes that is how we found out when the checks started coming. Sometimes things even change once the royalties start. For instance in the beginning Mitsui did not market their own gas Anadarko sold it for them and paid us until April of 2012 then they sold their own gas from our units and began paying us directly,

All very confusing but you will figure it out.

You can check in your local courthouse that is where the lease assignments are recorded.

Permalink Reply by Jack Straw on April 6, 2013 at 11:37am

There are a number of ways that matters could be handled:

Consol could trade their interests to Antero for acreage elsewhere that Consol want or need.

Consol could sell their interests to Antero.

Consol could participate in the wells drilled by Antero by paying their proportionate share of the drilling and subsequent production costs; this would be referred to as earning a "Working Interest".

Consol could participate in the wells drilled by Antero by allowing their acreage into the Unit, but not paying towards the well. In this manner they would have a (negotiated) interest which would be (significantly?) less than their proportionate interests in the acreage of the Unit. This is referred to as a "Carried Interest".

Consol could trade their interests to Antero for a certain (negotiated) royalty percentage of the production of the Unit. This is referred to as an "Overriding Royalty Interest" or more simply referred to as an "Override".

Any of the above forms of "horse trading" could occur, as they all commonly occur in the industry.

 

All IMHO,

                   JS

 

 

 

Permalink Reply by The Hiker on April 6, 2013 at 3:51pm

JS:  Thanks for the information/really interesting.  I was looking at an "Estimated Recovery Bands" map of the Haynesville shale that I think I got from GMS somewhere recently, and it shows many "super sweet spots" within the general area of drilling interest; some of these spots are as small as 3 miles in diameter, with "double extra sweet spots" within these of about a mile in diameter.   If the Point Pleasant exhibits similar undulations in thickness, porosity, etc...(a big if?) I would think companies would be hesitant to "trade" unless they really knew what was down there.   How much do they really know from their surface seismic testing?   I realize that they get the best information from actually drilling a hole, or examination of old well cores, but if things can change within a mile or two from a known well, they would seem to be flying semi-blind when they move beyond that boundry into the unknown.   Or, is the Point Pleasant more uniform in it's geology, and only changes slowly over distance?   We've all seen the thickness, TOC, etc. maps, but the detail isn't that fine.   They talk about the Utica being "de-risked", meaning there is a high probablility that drilling here will be successful, but there still remains the question of variability (unless they can really figure it out from surface testing?).   Questions, questions.....I appreciate your knowledge and input.  Good stuff!

Permalink Reply by The Hiker on April 6, 2013 at 7:13pm

So, we've got a mix of things here:  On the Inherst plat, the Dawson and Weiss acreage leased to Antero are included in Gulfport's unit (working interest, carried interest or override?).  In the other examples, Eclipse assigns their leases to Antero (sale).  The tangled web they weave.....

Good research!

Permalink Reply by BuckinghamGasMan on April 22, 2013 at 9:39am

I'm not not answering because I am an expert but I would expect that a company can't create a Unit which would include land not under their control. Maybe they have flipped the acreage but not told the landlord?

Permalink Reply by Paul Martinelli on April 23, 2013 at 8:47am

A company CAN create a unit in which land is not under thier control.  They either buy out the lease from the other company, or they are partners in the unit.

Permalink Reply by T. Alexander on April 22, 2013 at 12:56pm

It is my understanding that Antero has recently reached agreements with every player in the area where they want to drill in the northern Noble County area and are raring to go.  In other words, there are no impediments with other drillers or land not under their lease.  Things were already looking good on virtually every front, including pipeline construction, midstream processing capacity, and even water (thanks to the MWCD agreement). 

Permalink Reply by The Hiker on April 22, 2013 at 7:11pm

T.A.:  Interesting.   I just heard the same comments yesterday about Antero, Eclipse, Carrizo and REX making a cooperative agreement, but CNX or Gulfport were not mentioned as taking part.   Has anyone else heard about the agreement or who is included?  With CNX holding so much acreage in N. Noble, it's hard to believe they are not sittin' at the table.

Permalink Reply by The Hiker on April 23, 2013 at 8:35am

The Miley well in northern Noble county was started by Eclipse, but "sold" to Antero.   I think it was  shared 70/30 like your neighbor when the dust settled.  I've heard that they did this same deal on a lot of acreage Eclipse leased.

I found out that our neighbors lease was sold by looking it up in the courthouse.  The Lease or Memorandum will have a notation on it that it has been assigned, and then reference the book/page where you can go find out who it was assigned to.  If you want to know, it's pretty easy to do, but you gotta go to the courthouse and fight the crowds of O/G guys searching titles.  The people working for the county are very helpful if you go, and will tell you how to do it (or do it for you if you're nice).  NOW WHAT?   Figure out how you're going to spend all that royalty money....good luck!

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