5-10 horizontals someday?


#1

Word, all second-hand, is that horizontal drilling was to start the past two Aprils, 2017 & 2018. Last I heard from neighbor is now 4/2019. Any way to find out when/if. Would like to understand what revenue potential might be for 1/8 interest under 6th PM, T6N, R64W, SESW? Supposedly, Noble now owns our lease, trading with PDC and view that as positive.


#2

Hard to say if they will drill it at all. They permit all the time and do not end up drilling. Especially now in Colorado. The word on the street is that even though that new set back law didn’t pass in November, it will next time around (in 2 years). Because of this, a lot of companies are pulling out of the area. Also, with oil prices being down again, that may be another reason they do not drill. Noble had mine leased and when called to see if they would extend the lease, they told me they weren’t going to do anything with my acreage any longer(there was a permit on mine as well). Mine are in the township next to you.


#3

what section in 6N 64W?


#4

HBrent, As Jeffrey mentioned, we would need to know what section you are in to give you more specific intel or you can search yourself on the COGCC website to look at an interactive map where you can view existing and permitted (or pending permits) wells. If wells on your minerals were permitted a few years ago then the permits are likely getting ready to expire if they haven’t already. If so, one way to glean an operator’s plans is to see if they have renewed the drilling permits.

It is always a shot in the dark but you could also try to call the operator’s owner relations line to see if they can provide any information regarding their plans for any permitted wells. Usually they won’t provide specific dates but it is always worth a shot.

Finally, Cole brings up a good point regarding the political environment in Colorado and current oil prices. Spending at some companies is down because of these factors. That said, there is another mindset in the industry right now where some operators are looking to drill out existing acreage (especially in core Wattenberg) before additional setback requirements are passed. It is likely that existing wells/wellpads would be grandfathered in and operators could come back to existing pads to drill but any additional setback requirements would be imposed on new locations.

I hope this helps - again, let us know the section and we can provide some more specific info.

Thanks! Matt


#5

SESW is the section. From what I understand, the permit goes sometime into 2020. Yes, the political climate is not good, even with defeating Proposition 112, last November. People have no clue what 2500’ looks like, but makes them feel warm and fuzzy. Last summer, I stopped in a little cafe, out in the “middle of nowhere”, in N/E Colorado and asked why the oil traffic was almost nonexistent? Locals said Colorado is so hostile to the industry, that they moved equipment to TX.


#6

Fo those asking… Section 8. Thanks.


#7

Section 8. …


#8

Brent, It looks like PDC has 7 permitted wells with wellbore spacing units that your minerals in the SESW of Section 8 would be pooled into.

To figure out your Net Revenue Interest:

NRI = # of NMA in spacing unit / Size of spacing unit x Royalty Rate

Assuming it is a 640 Acre spacing and if you have an undivided 1/8th mineral interest in that quarter-quarter section like you mentioned:

of NMA = 1/8 x 40 Gross Acres = 5 Net Mineral Acres

In this case the wellbore spacing units are around 360 or 400 acres (go to the COGCC website via the link I shared earlier, then you can go to the map to find the wells in question and double click on the well to pull up more info. There you will find a link labeled “docs” that will list documents associated with each well (proposed spacing unit info, APD’s, etc.). You will have to look at each well to figure out the exact spacing unit size and how much of your minerals would be a part of it.

You can Google “How to calculate your Net Revenue Interest” to find more in-depth articles and examples.

To get a very rough approximation of pre-tax royalty payments per well, you can look at production from nearby offset wells (in this case you would look for horizontal wells with a 1-mile lateral (1-section long), multiply by the oil or gas price, and then by your NRI. Keep in mind that the price that the operator will get in the DJ basin will be less than WTI (deducts vary based on any price contracts in place but the spot price will be at least $2-3 less than WTI). Also, if your lease allows for any deductions you would need to take that into account.

Thanks, Matt