GTTP

General Mineral Rights Discussion
#1

Remember the stories about settlers who carved GTT (Gone to Texas) in their front door when they abandoned their farms and moved to Texas? It seems like the oil industry should be posting GTTP (Gone to the Permian) on their websites. I have Google alerts set up on a few Permian plays and have never seen anything like the steady stream of deals announced where companies are shedding assets to beef up or get their foot in the door in the Permian, primarily the western Permian. One estimate is that 68% of new production growth is coming from the Permian.

Besides the obvious economic factors, I open it up for discussion. How much of this is due to:

1) hostility to drilling elsewhere;

2) herd mentality;

3) Wall Street/investor expectations and pressure?

These are smart people so I have to think the primary driver is economic. I have heard estimates of up to 80,000 BOE recoverable PER ACRE in the better parts of the Permian. But still, the growth is so lopsided, I just can’t shake the feeling some of these other drivers are at play.

Thoughts?

#2

Wade,

As a North Dakota mineral owner I would choose 1) hostility to drilling, as the main reason why companies like Oasis are bailing out of ND and heading for Texas. The state government sees the Bakken as an unlimited cash cow that God provided in order to fund every pet project while enriching the relatives and friends of corrupt politicians. They rob the mineral owners outright, screw the oil companies and steal 10% of everyone's royalties right off the top through extraction taxes (and now the Democrats want to increase the taxes again by ballot this November). They truly believe that any royalty money not collected by the state has been "stolen" or "lost" or "given away" as if it was rightly theirs to begin with. They steal from the federal government and the Indian tribes, which results in endless lawsuits that go on for years and stop development, particularly along the Missouri River. The only state official who seems to have a clue is Governor Burgum, but he has to fight continuously with the Attorney General, rigged courts, crony judges and the AG's greedy, foot-dragging allies in the capitol and the legislature. The oil companies are sick of it and that is the main reason why they are either leaving, selling off assets or reallocating their business to other states. The brutal winter weather doesn't help either, you could count that as another form of hostility.

#3

Dogbert,

Sorry to hear about the state of affairs there. How organized and vocal are the mineral owners there?

#4

Wade,

Some mineral owners have tried to fight back but the legal costs are prohibitive and the courts are stacked with judges who are, shall we say, more loyal to the establishment politicians who appointed them than they are to the rule of law. There isn't really an organized group of mineral owners that I know of who can pool their resources to help each other. However, the North Dakota Petroleum Council is a fairly powerful lobbying group of oil companies and related businesses that have been pushing the state to resolve some of these issues for the past couple of years. Also, some of the legislators understand that the state is killing the goose that laid the golden eggs, so they are trying to help. Other legislators would be happy to keep everything tied up in courts for as long as it takes for their side to win.

It's about -22F in the Bakken tonight. Can you imagine trying to work outdoors under those conditions? It's been that way for weeks.

#5

There is a NARO chapter in ND. Maybe worth checking out.

http://www.naro-us.org/NorthDakota

#6

Mr. Caldwell,

I wonder if some of it is a "herd mentality". I remember when the Haynesville Shale was booming in our area and lease prices went from $200 per acre to over $10,000 per acre. When the bottom dropped out, all the operators left at once. Kathy

#7

Kathy,

The investor pressure and herd mentality are sometimes hard to tell apart. Of course, the Haynesville suffered from the collapse in gas prices also.