Logan County 21-17N-range 4W. We have just been offered $350 an acre and 3/16. Is this a fair offer?
considering the plunge in oil prices and the economics of the play is in shambles, probably. Be sure you have a good horizontal and vertical Pugh clause, limit post-production expenses to compression and transportation (no marketing or "enhancements")
A favored nations clause is helpful. Thus, they would have to match any higher offer made to other nearby mineral owners.
Gary, that is low by about half which is usual for the first offer. s 22 just to your east was Force Pooled at
$750 3/16 $650 1/5 $0 1/4 in 2013. I have seen $850 3/16 in the Township as you move farther east. So try to get more. Make sure you have really good lease clauses. Friend me if you need help.
Gary, In 2014, we were offered $400 1/4 in Payne Co. and Logan Co. has some very good wells. Oil prices have gone up and down since the first productive well was drill, so we use averaging to determine drilling economics. The current one year averaging $115 to $75 = $95. http://forecasts.org/oil.htm We use a longer period of time for averaging and factor in future demand to determine future oil prices and the US EIA short term forecasts $84 for 2015. Long term pricing is more difficult, but I still like to use the average, because it's worked for me for over 30 years. Look at the price charts and you will see the average going forward is $94 - 2015, $108 - 2020, $115 - 2025 and $123 - 2030. I use Canadian future forecasts as they are a bit more accurate than the US. http://www.nrcan.gc.ca/energy/publications/markets/6511
No who was the company?
Schmidt Resources
Talk to Beau McMillin, attorney in OKC. He is very good and will help you with all of your questions.
Liz, Does Beau McMillin know what the drilling plans for Logan and Payne area is for 2015? The Saudi's say they are keeping the oil price down for 2 years, but our area is high net back and can profit below $60 per barrel. Mineral owners should not let this temporary down turn in oil prices devalue their minerals. The Saudi's simply made a deal with China to sell them some cheap oil for a couple of years to help kick start China's economy. Japan just went into a recession and Europe is still struggling. The powers that be are trying to prevent a Global recession.
The economics in Logan county is hit and miss. Low prices are not helping and few wells are economic at $60. I would say I would expect offers to tail off over the next few months. And I know one area operator that is privately saying they haven't paid out yet on their investment although they have drilled several dozen wells.
BTW. Stephens Production (Ft. Smith, AR) is buying some of the Slawson properties - WATCH them very closely.
I just appraised an estate in Arkansas were the division of interest calculated to 30 acres on a long term lease from the 1960s. Not only was the property 40 acres and checks should have been one-third higher, but they were charging post-production expenses on a lease that did not allow for them. The operator? Stephens Production Company.
TL, Operators started holding back on my production when prices started falling, but oil can't stay this low for the next 5-10 years, because the US is counting on off shore to supply our county long term (100 years) and most off shore needs above $100 to profit. US NGL production and prices will profit from US exports to Europe and China as those economies grow. AEP should be watched closely also. In fact, honest mistakes that can be made, so all operators need to be watched.
The trouble with waiting 10 years is that a given well is likely to have sold 75% of its products, or more, at deep discounted prices. I know a couple of tiny companies that are talking about going back to shallow vertical wells, or exploring for carbon dioxide or helium.
In some areas, verticals will work for the Miss Lime making our area all the more profitable. New technology has increased recovery of hydrocarbons from new wells from 25% to 75%. Texas is leading the way and has no plans of slowing down regardless of lower oil prices and Oklahoma is going to continue the high output also. http://finance.yahoo.com/news/texas-drives-u-oil-boom-100000129.html
Way to Go TX and OK!
Welll.....maybe. Plans or not. The companies will slow down if price remains at $75 or less. They have to. They will burn their cash. These wells are not self-sustaining at these levels. And my sources in OKC say the panic hasn't set in, but "deep concern" about prices if these don't improve by spring.
And I would ignore what the talking heads of CNBC, etc. say. They are always about six months behind what is really happening.
For instance, do they ever mention that they are laying down the older rigs already? They are not equipped to horizontal drill efficiently and without a vertical well contract, many are being put in mothballs. Day rates are sky high but even so, those old slow rigs won't draw those rates and are basically not making any money for their owners.
TL, My first post above is from Houston Business Wire which reports on current businesses in Houston where there is more of the world's largest oil and gas companies than any place on earth. Here's a list of Houston O/G companies. http://www.subsea.org/company/allbycity.asp Also, Bloomberg is not CNBC, but it leads in international business news, world markets, global economy, finance and politics reporting. Please post a web link to where you are getting our information, because your information directly conflicts with up to the minute news I am receiving out of Houston which is the oil capital of the world and I would love to read it. Right now, I'm working in Houston and could take this afternoon to verify your claims if I had the name of your sources.
TL, More good news, "Natural gas for December delivery rose 3.6 cents, or 0.8%, to $4.407 a million British thermal units on the New York Mercantile Exchange. Prices are now up nearly 11% from the month's low closing price set a week ago." This information is from The Wall Street and The New York Mercantile Exchange that posts up to the minute oil and gas prices. http://quotes.ino.com/exchanges/contracts.html?r=NYMEX_NG
http://online.wsj.com/article/BT-CO-20141120-706307.html?mod=WSJ_Energy_middleHeadlines
Also, don't worry about the old rigs going down as there is a Federal Laws NTL 2010-G05 requires wells that have not been used for the last five years to be to be permanently abandoned, temporarily abandoned, or zonally isolated within 3 years after Oct. 15, 2010. http://www.rigzone.com/training/insight.asp?i_id=354
So they didn't lay the old rigs down due to lack of drilling and production. They laid them down due to old age! http://www.rigzone.com/training/insight.asp?i_id=354
The port of Houston is expanding like crazy due to the increase in export of natural gas liquids (NGL's) being shipped out of the US. So, that's why my official sources are stating that TX and OK oil and gas companies will keep on drilling and producing TX and OK that is liquids rich with the NGL's and the Port of Houston will continue to expand and ship it out. Way to Go TX and OK! http://www.enterpriseproducts.com/operations/nglexport.shtm
They are laying them down because they are not economic. But they are serviceable rigs.
It's cold and fall, nat gas always goes up in winter but the storage fields are bursting at the seams and 1,500 wells in PA are awaiting a pipeline and are shut in. I don't read the popular press. I do read Oil & Gas Investor, A & D Watch, and Oil & Gas Reporter. And after 20 years in the biz, I still have a few gray hair buddies who own their own companies and / or are executives with the likes of Devon.
But the internet also has some interesting commentary...take it with a grain of salt, but I'm just saying...I trust those old timer geologists a whole lot more than I do the trades and press. And what they tell each other during those Exploration Manager's meetings are often spot on. When costs (which public companies prefer to downplay to their invesors) exceed income, they have problems. And I suspect by next summer if this price doesn't pick up real soon, we'll see thousands of wells forced to shut in. There simply won't be room in the pipeline for it.
http://www.americanthinker.com/articles/2014/11/lower_oil_prices_sl...
http://www.naturalgasintel.com/articles/100412-low-gas-prices-lack-...
Rice Energy Inc.’s management team on Wednesday failed to impress, as year-over-year natural gas prices plummeted and production was held back by a lack of progress in the Marcellus Shale, where it completed only five wells during the period
and...
As with imports, natural gas exports from the United States also declined, from 1.62 Tcf in 2012 to 1.57 Tcf in 2013, a decline of about 2.9%
We are using more gas, we are producing more gas, and one warm winter and there is no way to sell gas
Spot prices at several Appalachian pipeline hubs spent the summer and fall $1 to $2 below the national benchmark of roughly $4 per million British thermal units.
Read more: http://triblive.com/business/headlines/7042255-74/production-prices...
TL, I operated a little bitty oil and gas company for over 30 years, worked and ate lunch with CHK executives and sold some OK red dirt to a Devon executive, but I keep the minerals. Right now, we are having a bit of a war with the Saudi's and I'm proud to say the shale boys are not afraid. My money is on the home team. http://eaglefordtexas.com/news/id/139493/american-producers-call-saudi-bluff-ready-price-war/
He keeps up with everything so I would say the answer is yes.
Having been thru 1981 and everyone saying "This time it's different"....well, just call me Cassandra
I remember Aubrey McClendon as a docket jumping landman and when I see the huge numbers of unkept promises CHK made, the double dealing, the inaccurate paperwork etc. they remind me of a coon. What they can't eat they **** on. When it is over I expect CHK to be owned by Anadarko. I expect Linn, and a bunch of other highly leveraged companies to be gone...and in the short term, I think lease offers will dry up on the vine. They are only going to lease what is necessary to get what they have already planned and beyond that, they wait. If prices do not rebound by March, I anticipate a huge shake out and tremendous amount of acquisitions and divestitures.
I was active from 1973 to 1993, and left the business as a geologist. Now as an appraiser who specializes in oil and gas properties and teaches mineral rights to real estate professionals, I still trust the judgment of my old peers who remain in the business. Too many companies have said the same thing. The profit margin is very low and years to payout is much longer than they want for most of the wells. It means they carry debt on the books that is eating operating money. The burn rate of cash in those companies over the next six months will be interesting to watch.
Gobbling up $50 billion of high-yielding U.S. junk-bond offerings by energy companies this year may have seemed like a good idea when oil was above $100 a barrel and yields were at record lows.
With prices falling toward $80, bond buyers have instead been saddled with more than $2 billion of lost market value and growing concern that too much credit has been extended too fast amid America’s shale boom. Prices on $1.6 billion of speculative-grade bonds sold by the upstart exploration firm of former Chesapeake Energy Corp. chief Aubrey McClendon have plunged as much as 19 percent since being issued in July. Another $1.1 billion issued the same month by Paragon Offshore Plc are down as much as 28 percent
I'm just saying....
TL, You are right, it's the old squeeze play that's been happening as long as I can remember. But, it is different this time. The 1973-74 oil embargo and 1975 US oil export ban (Energy Policy and Conservation Act) was bad for US oil production, so we drilled for gas, but there's a loophole in this ACT which allows for the export of NGL's and our area shale is high NGL production. "The Alternative Fuels Act of 1988 amended the Energy Policy and Conservation Act to pursue the use of alternative fuels. The amendment encourages the development, production, and demonstration of alternative motor fuels and alternative-fuel vehicles. Alternative fuel means any fuel not derived from petroleum. However, the 1988 Act includes NGL's like ethanol, methanol, natural gas, liquefied petroleum gas, hydrogen, and electricity." http://energylaw.uslegal.com/energy-policy-and-conservation/#sthash.iKvI0DNy.dpuf
The 1986 oil collapse was bad for US oil production, but in 1985 the Saudi's were faced with declining world oil demand and increasing non-OPEC production. This time, the Saudi's are faced with increasing world oil demand and increasing non-OPEC production. Also, The Energy Policy and Conservation Act of 1975 banned US oil exports in an attempt to increase coal production. Now, The new EPA rules are deceasing US coal production. http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1488&context=wmelpr http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule
This time, Russia is getting squeezed right along with the little guys, but OK shale NGL production will continue to ramp up. Unless Europe wants to bow to Putin, Europe needs our NGL's. The little US oil and gas companies who are highly levered may have to sell their stakes or go bankrupt, but the big boys know what they are doing. Chevron Phillips Chemicals, a 50-50 venture between oil giants ConocoPhillips and Chevron recently restarted a cracking facility in Sweeney, Texas. Range Resources has an agreement in place to begin ethane shipments to a petrochemical concern in Norway beginning in 2015. http://breakingenergy.com/2013/04/22/ngls-to-be-exported-to-europe-from-the-us-before-lng/
"America's Next Top Export Won't Be Oil." http://www.fool.com/investing/general/2014/04/02/americas-next-top-export-wont-be-oil.aspx
I vividly remember 1986, my little OK company had no debt and survived, but many of my friends and colleges did not. There were 27 thousands bankruptcies per month in Houston, TX. It was surreal.
As for CHK, read my Logan, Payne and Garfield posts.