Investor pushing Abraxas to sell their wells.
I just received the save the date for the MARC conference in Houston next April. This is where the minerals buyers and the bankers bragged last year on how much they made on buying up all those acres from small mineral owners. Quite enlightening.
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Martha- And brag they do. I have seen several brochures from these companies soliciting investors promising a 11% annual return, upside, and stability. It’s either a too good to be true story, or it shows how much mineral owners are leaving on the table when they sell.
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Continental was bragging in their investor presentation that they were getting a 4X return on investment for their bought acreage. Just shows that mineral owners are not getting what I would consider as fair offers for their minerals.
Pardon the intrusion…
“We suck” is not really what you put in promotional materials, which is what an investor presentation or a conference presentation is…a request for more investment. You pencil whip the #s, cherry pick results, inflate forecasts, understate CAPEX, etc. Harold Hamm’s stock was 80 five years ago, now its 35. Five years ago grandmas minerals were worth $4k/NRA, today they go for $16k. Who should be bragging?
The irony of the whole thing is that shale boom is pretty much helping out everyone in the country EXCEPT the E&P companies and the service companies. Look at the S&P E&P Index. Killed over 5 years. Look at SLB and HAL. Look at Weatherford and Basic. It is a total complete poopshow. Full cycle econs for folks on the whole are terrible. Yet volumes are great. Lots of jobs. Tons of money to individuals. Not the least of which are surface and mineral owners.
This isn’t to say that mineral buyers haven’t done well. But really, an 11% return over a short window in a risk business isn’t exactly pillaging the villagers. We will see how it shakes out in the long term.
OilBoy-- It seems like every time prices firm up enough for most people to make money, another dip comes around. I think the volatility is taking its toll, mostly on the people putting in capital.
Startling RigZone article claims Permian fracking activity under reported by 20%+ in 2018.
(Source: Grant Black, Executive Director - NARO) Permian Basin-to-Gulf pipeline ahead of schedule, could be operational by September. The $1.75 billion pipeline that will pump up to 2 billion cubic feet of natural gas a day to the Coastal Bend from the energy-rich Permian Basin is running ahead of schedule and could be operational by mid-September, the project developer says. “The pipe is in the ground, there is still commissioning work going on on the compressor and meter stations,” Steve Kean, CEO of the Houston pipeline operator Kinder Morgan told investors in a conference call last week. "But our expectation is for a slightly early in-service date. Ken Medlock, director of an energy-studies program at Rice University in Houston, says an assessment Tuesday, Nov. 15, 2016 by the U.S. Geological Survey that the Wolfcamp Shale in the Midland-Odessa region could yield 20 billion barrels of oil is another sign that “the revival of the Permian Basin is going to last a couple of decades.” (Photo: Courtney Sacco, AP) The pipeline, called the Gulf Coast Express, is part of a twin project by Kinder Morgan to send natural gas across vast expanses of Texas to meet growing energy demands from East Texas to Mexico.
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On the positive side on prices, exports have risen to 3.3 million barrels per day, which is an increase of 1.1 million from just last summer. Maybe we can export our way out of the Permian induced glut.
Article talking about fracing efficiencies. Record fracing numbers with 20% fewer frac crews. If you wonder how they keep going with middling prices, here is an example. Tremendous efficiency gains.
Halcon has filed Chapter 11 again. Supposed to be “pre-packaged”, meaning they have a deal/financing lined up to get out of Chapter 11 pretty quickly.
Water, water, everywhere. A dizzying number of big water deals announced, completed, hyped, and in between. NGL spending plans on water - NGL
They are building water disposal into its own midstream business, with an infrastructure to match - Big plans
Concho doing a deal with Solaris - Concho
The good news- help is on the way. Grand Prix NGL pipeline by Targa has started full operations. Up to 200,000 barrels per day. The Plains Cactus II oil pipeline has started operations. Kinder Morgan announced a thrid gas pipeline to SE Texas. Targa Plains Kinder Morgan
IMPORTANT NOTICE FOR PERMIAN ROYALTY OWNERS - Check your check stubs the last few months and the next few months for improper deductions on gas royalties! I have seen several operators “paying” (deducting) negative royalties on gas because of the near negative or negative gas prices for much of April and May in the Permian, especially in the Delaware Basin. In other words, they are deducting amounts in the gas royalty column against the payments made in the oil royalty column. Also, NGL prices are extremely low.
The first thing you should do is check your lease and see what the deductions are for. If your lease allows post-production deductions, they may be paying zero on the gas royalty and then charging you for post-production expenses to get to the negative number. If your lease does not allow post-production expenses, some are paying negative gas prices (they are having to pay to have the gas taken away) and passing on this loss to you. Read your lease carefully, but if it says your to be “paid” a royalty on gas, I don’t see how they can pass on the loss to you. Still others are taking the position that , if the lease allows post-production expenses, that even if it says you are to be “paid” a gas royalty, they can deduct the loss as a post-production deduction expense.
I realize times are tough when it comes to gas prices, but the operator is the one who took the risk of losing money, not the royalty owner. The royalty owner is supposed to be “paid” a royalty, not deducted a royalty.
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