Glenn, Most are trying to prove production sell for a huge profit. Companies turning acreage keep an ORRI ie..you lease for 20% RI( 80% lease) they turn it for 75%. . plus a bonus on what they paid you ie..you get $200.00 acre they turn it for $500.00 acre. Most of the acreage they will not drill. Its get 'ahead of the play'...
Got that part, Walter. But doesn't someone eventually have to drill or do they just keep flipping it for higher and higher prices, which seems riskier and riskier the higher the price goes. Seems like someone is going to have to produce oil out of it eventually. Nothing goes up forever. Since not much is drilled, why don't the leaseholds just sell directly for the 75%, if that is what the true market is, especially if the people you lease to don't do much of anything to add value to it?
Glenn, yes there is a natural limit as to how many times a lease can be flipped before someone needs to drill. A mineral lease is perishable. If not drilled, after three or five years it spoils for whomever is holding it. So as you point out, it either gets drilled or someone eats the cost of the lost lease. Then they either move on, or pony up to lease it again.
Chesapeake may sell its Permian Basin holdings. In part they are focused elsewhere (WY, OH, etc...) where they've blocked up very large tracts. In addition due to all their leasing activity elsewhere Chesapeake has a huge debt load. I suspect they're forced to sell some assets to lower their debt and generate operating capital to drill elsewhere. I don't think their going bust but they are far more leveraged than most.
Thanks, Eastern. This particular lease is almost 18,000 acres, and this permit would be the first one on the entire tract. I was wondering if the permit was sought to drill a single well so they could say they drilled and complied with the terms of the lease to keep the drilling rights for an indefinite period of time, prove some type of production capability of the tract, and then sell it. A single well when there's technically room for more than 400 wells wouldn't seem to amount to much. It seems that one could estimate the total oil production of a given tract and back into a maximum value (at current oil prices), and then start deducting for cost of drilling, royalties, time factor of money, etc., the current purchase price, and see how much money there would be left to make. I'm guessing there's still lots of potential valuation room in a tract this size. Just seems riskier and riskier the higher the price goes to an investor without anyone doing significant drilling.
Application for drilling permit, 4-13-2012 Berry Oil Corp, Sec.367 Block 97 McKnight 367 9,000 ft. 4-13-2012 Berry Oil Corp. Sec.414 Block 97 Davenport 414 9,000 ft.
Richard, I'm trying to understand more about the company's goals and rights. Chesapeake came out said they wanted a JV or outright sale of their Permian assets in early February. They filed for the drilling permit on one section of our piece in mid March, which is the first one on the entire tract. I'm trying to figure out if they're just trying to prove production on a piece of the land so they can extrapolate to the rest of it in their sales package, are really starting a drilling program, or what.
Also, I'm intrigued by the completion depth of the well they proposed. It is 14,000 feet, the deepest one I've seen. It's a horizontal well. Why that deep?
Glenn the permits in texas only show total depths on their permits so that is the total length of the drill, so it is probably 9,000 ft deep with a 5,000 ft lateral. On Okla.permits the turning points and lateral lenghts much easier to read. I think once the 1st quarters reports come out it might tell us what their plans our for the rest of the year. Remember they also leased another 17,000 acres just south of you which we have a small part off. There is less then 2 years left on our lease without them releasing with the option.alot of extra expense if they release all of it.
Thanks very much. That helps. Ours is same, less than two years left. I'm assuming if they drill even a single well on a large piece, they get to keep the rights to the entire piece? Does seem like they spent a lot of money to tie up this acreage (that's about 35,000 total acres out of their 1.5 million, or about 2.33% of it). They were throwing around numbers of $8-$10 billion for an outright sale of their total acreage. I know different pieces of land have different values, but if you just divided it out evenly, it comes to $6,000/acre, or over $200 million for the 35,000 acres. I'm sure it's much less than that because there's no production on them, but still seems very high. I've got more questions if you have the time. One, the acreage for the well permit is listed at 642 acres, a little over a section of land. Do they run one lateral and then run other laterals off of that one. I don't see how they get to the oil in an entire section just running a 4,000 foot lateral across part of it. Sorry for the stupid questions, but I'm not in the business and am just trying to understand how it works.
Glenn i am not sure about Texas but every section should be an indivual tract, if not why would they want a two year extension on everthing, On the horizontal wells, your lateral usually runs north and south and only drains the area close to it. The Woodford play here in Okla. the drill the inital well to hold the lease and then are coming back and drilling a total of 6 to eight horizontal wells per section to drain the section. If you would go up on the forum part of the web site and lok under the Can Wodford section and the Grady County section in Okla. and read them you wil get a very good education on Horizontal drilling in a gas and oil play and the value of minerl acres. I have learn more over the last year just asking questions and joining in discussions on this forum. I really hope something will happen in Borden County so my grandkids will benefit some.
Gleen i meant the group area of the website....
Thank you, Richard, I will look those up. The sections are individual tracts, but I guess it depends what the lease says. The lease probably states that they are leasing Sections 9, 10, 11, 12 etc of such and such survey, and if they don't drill then they lose the rights to the lease. My question was if they just drill a single well on one section, do they retain rights to the entire tract and get the extension. That would be very valuable to them I would think in selling the rights, knowing that the entity they are selling to has not only the remaining term of the original 3 years, but also an additional 2 years to do any further development. If they just have rights to that one section that they are drilling on, then whoever buys the acreage would have to drill on the other sections within the remaining term of the 3 year lease to keep the rights after that.
Glenn as i understand it if they drill and get production on that tract that tract is held by production until production ceases unless there is a depth clause on the lease. I hope some one else will put there understanding of this in this discussion.
I'm just wondering if the "tract" is the tract in the well permit (642 acres), or since they leased 18,000 acres, the 18k is considered the "tract" and they get to keep the "held in production" status on the entire 18,000 acres because they drilled a single well on one 642 acre piece of it.
It all depends if you have a vertical and horizontal Pugh clause, and if your lease has a retained acreage clause.
Intent to drill, TRC Website 4-13-2012 Sec.469 Block 97 Berry Oil Corp. Jones 469#1 9000ft. Sec423 Bock 97 Berry Oil Corp. Jones/Willard 423#1 9000 ft.
Linda are any of these new intents to drill in your area I think you told me you leased with Winnie with Berry as the operator?
Intent to drill, TRC website, 5-11-2012 Section 3 block 32 T4N Hubbard 3 #1 vertical 10,000ft, Hubbard 3 #2 vertical 10,000 ft Raw Oil and Gas
National Assn. of Royalty Owners, Texas - Town Hall Mtg. in Lubbock on Aug. 14-15
(I learned SO much at the NARO conventions - would highly recommend this to anyone who's not an expert!)
Contact Person: Ed Fowler (806) 535-9068
Dates of Event:
• August 14, 2012 at 6-9 p.m.
City Bank Building
5219 City Bank Parkway
• August 15, 2012 at 1:30-4:30 p.m.,
Texas Tech University McKenzie-Merket Center
17th Street and University ON THE CAMPUS
Sponsoring Agent: National Association of Royalty Owners- Texas, Inc.(NARO-Texas)
The National Association of Royalty Owners will sponsor Town Hall meetings in Lubbock on August 14th and 15th to educate area residents on topics of interest to mineral/royalty owners. Owners of small and large mineral/royalty interests are encouraged to attend.
Topics will include determining decimal interest, negotiating leases, division orders, production payments, state statutes, helpful websites, and the role NARO and NARO-Texas play in protecting mineral and royalty rights. There will also be time for Q&A.
There is no charge for the meeting. Reservations are requested for adequate planning of printed materials. Adequate parking is available at both locations, but ride-sharing is encouraged. For reservations, please email: replynaro2012@gmail.com
For more information on these events, click this link: NARO TX Town Hall - Lubbock, TX.pdf
My two cousins own the mineral rights in the s/w 1/4 of section 81 in Block 20 of the Lavaca Navigation Survey. I see (thanks to your collective information about TRC) that there has been a dry hole drilled there and in the s/e 1/4 too, but in the latter a productive well. So:
Any leasing activity in that section of late? How can I find out just how dry the dry hole was, and when it was drilled? There are many wells within two miles, to the north, west, and south. Are they all producing?
Thanks, folks. Jerry Wigglesworth
(I live in Morris County, Kansas)
Looks like Borden county is getting active. According to the USA rig count on 10-5-2012 shows six rigs drilling in the county.