I see Comstock is moving South into Leon County. This doesn’t look like the same approach as the Freestone wells west of this location. Is this an unproven area? I don’t see much existing gas production here and not sure I’ve seen one go through 3 units like this.
Yes, things seem to be moving south into Leon County. We just signed a lease outside of Centerville with Mitsui. This comes after signing a larger lease with them near the Freestone county line three years ago. I have also heard of production spreading as far south as Madison County.
Here’s a map showing the locations of all the Western Haynesville horizontal well permits to date (Comstock, Mitsui, Adamas (formerly Aethon), and Expand):
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With Mitsui’s recent well issues you mentioned in Freestone and the lack of wells in this location, is this area considered more speculative?
Mitsui did six “test wells” to study the depths all along stating they are not going into full production until after 2026. This according to thier press release. So story to be continued.
I have not looked at any of their other units, but it looks like Comstock is playing the same games with pooling as I have seen with a number of other operators. They are drilling one wellbore and forming three units. This will allow them to hold 1490 acres with one single well rather than 600-700 that is called for in the lease. It creats a two sided coin because a lot of non-drillsite owners are included, but the owners under the drillsite are heavily diluted. I have seen this in numerous places with as many as five units being formed initially. I have not dug into the legalities but it sure seems like a questionable process. I assume they will get away with it until a drillsite owner objects. Does anyone have any firsthand experience dealing with this?
I heard they are doing this to tie up the ac so they want have to release it later. They will come back and drill multiple wells on these locations.
Does a drill site owner have any recourse? I’m not sure what an objection might accomplish, but I’m guessing anyone with experience in this can fill us in. Thanks for the insight.
I do not know if anyone has contested this new process or developed a lease clause to prevent it from happening. There is a lot of potential downside, particularly considering none of the leases the main players are proposing contain either pugh clauses or depth releases. The footprint they are holding could even be larger that the actual acreage in the merged multi-units. Some of these wells will hold a lot of acreage and will be there for a long time.
The company strategy is ok in a perfect world. They are planning on drilling a great well and holding enough acreage to drill ensuing wells. The problem is this is a far from perfect world. Some wells will be drilled that are marginal and don’t merit offset, but will still produce for many years. Mineral owners without proper lease protection will not be able to lease and will only be receiving royaties on a diluted basis.
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I believe you will find this “allocation unit” has been blessed by the Railroad Commission. It’s a regulatory issue. Comstock has taken a lot of leases and acquired many thousands of acres already held by production. This allocation unit concept has been done in other areas so it has become an established way to drill horizontally across existing units. Those lessors that have been HBP by more shallow production cannot lease again unless they did have a “deep rights” release on their lease(s), in which case Comstock will have to take new leases. So, horizontal and pugh clauses will work in both cases (the more shallow wells and the deeper Comstock wells). The more common use of horizontal drilling with long laterals is obviously the cause. This concept is so entrenched in the construction of the units in the state, at this point I doubt it will ever be eliminated. Just my opinion. It will take a lot of money to fight it and I don’t think it can be reversed.
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Thanks Phil. I am seeing the same situation as Jas24. There does not appear to be any existing production or HBP acreage as in traditional allocation wells (which I do not argue against). These likely are newly formed units done in order to expand the footprint of this inital well, essentially circumventing the pooling provisions of the leases and formiing a 1400-1500 acre unit. This concept is now happening in many areas with multiple companies. It gives the companies tremendous leverage over the mineral owners. There is no guarantee they will ever drill another well in these units.
I have not researched the legalities of this, but my guess it is an evolving process. It certainly is a change in the historical way new areas have been developed. My guess is has or will be challenged by an owner of a tract the wellbore crosses. Their interest is essentially being highly diluted. With the quality of some of these wells that will amount to a lot of royalty.