Just wanted to ask everyone a question that has me stumped.
In 11/2010 Whiting drilled a 1 & 1/2 mile horizontal at a depth of 10300. They fracked and completed the well then plugged it. They then drilled another two similar wells and did the same thing in 2011. The first two were in Sec 20 Blk B19 Ward County Tx. The third one was in Sec 18 & 19 Blk B20 Ward County Tx.
They have left these wells plugged now for 3 to 4 years. From what I understand these wells probably cost them 30 to 50 million dollars.
They don't waste money like that. The wells are probably stranded. Eventually, they will catch up with pipelines and they will go into production.
Sometimes companies plan things well in advance. Also, if the market for the product is low, they may just wait it out. They then just produce enough to keep the lease active.
If they pull the casing and plug and abandon the well, it is all over.
The acreage is hpb by previous production and whiting must have transportation because it is on the edge of the North Ward Estes field. They hold everything in every direction but one block of twelve sections to the West.
And if they had poor production wouldn’t they have stopped after one or two wells?
Sounds like a great strategy; but, how are they able to hold these wells for this length of time, even a poor shut-in clause should stop this. The only thought I could have is that they are holding with other wells or they have leases that are so poorly written that they "bought" the minerals acres instead of leasing them! Robert V. Gill said:
Robert:They don't waste money like that. The wells are probably stranded. Eventually, they will catch up with pipelines and they will go into production.
Sometimes companies plan things well in advance. Also, if the market for the product is low, they may just wait it out. They then just produce enough to keep the lease active.
If they pull the casing and plug and abandon the well, it is all over.
I think they are old leases from back when they started the Ward Estes Field. They have some new and old Penn production in the sections they drilled. The only sections they don't hold are to the West.
I have been watching the wells for awhile now. Trying to figure out what is going on there. The only thing I can think is that they are holding the wells because they can’t work out a deal with one of the mineral holders to the west and they don’t want to start a leasing frenzy.
Larry, they could just be storing the gas in place, waiting for a sustained rise in the price of natural gas, maybe if we ever start exporting gas, they will produce those wells. Until the $1 per acre per year is a cheap lease.
Yep, we have a group in here leasing North of Flatonia with that kind of shut-in clause. Can't imagine signing a lease with $1.00 shut-in clause; but, they are getting a lot of people ready for the slaughter with their hands out. Plus, they are saying, "take it or leave it"! Sounds like a good one to leave. By the way, this is Texas!
r w kennedy said:
Larry, they could just be storing the gas in place, waiting for a sustained rise in the price of natural gas, maybe if we ever start exporting gas, they will produce those wells. Until the $1 per acre per year is a cheap lease.
Bigfoot, I was connected to the trucking industry for several years and much of what was being hauled was silica sand for propant and lime for the pads and roads. For a few years a well that they actually produced rather than shut in would have been news to us. My best guess then was that they were just storing it underground against future need and the mineral owners had no clue that that was an option.
A friend of mine calls early 2009 the oil and gas armageddon, but wells were still being drilled. I think it is because if you want to keep those acres in the company assets you have to drill them, They may not make money today but some day they will. Once you drill and test them, you can sell that lease to someone else if you need the cash. It's an investment. Not all investments go up but many will if you hold them long enough.
I'm sure not against anyone making an "honest" buck: but making it on the backs of the mineral owner, IMO, isn't my understanding of the honest way. A shut-in clause is put there for a reason and it isn't there so they can hold the acres without paying for the delay. IMO, drill it, produce it or get the hell away.
r w kennedy said:
Bigfoot, I was connected to the trucking industry for several years and much of what was being hauled was silica sand for propant and lime for the pads and roads. For a few years a well that they actually produced rather than shut in would have been news to us. My best guess then was that they were just storing it underground against future need and the mineral owners had no clue that that was an option.
A friend of mine calls early 2009 the oil and gas armageddon, but wells were still being drilled. I think it is because if you want to keep those acres in the company assets you have to drill them, They may not make money today but some day they will. Once you drill and test them, you can sell that lease to someone else if you need the cash. It's an investment. Not all investments go up but many will if you hold them long enough.
Bigfoot, the object of being in business is to make money. If they take the stuff out of the ground now, they have to sell it at the current price. The price this morning was $4.36. They would probably lose money and so would the royalty owner. How much more of nothing do you want? We need that stuff to come out of the ground when the price is higher.
Crude oil exports from the US have been banned since 1975. Natural gas exports require a license from the US government, and they have not authorized many. This keeps the price artificially low in the US. While the price is about $4.36 here, in Korea and Japan it seems to run between $18 and $20 per mmbt's. That is quite a spread.
Now, Mr. Putin is going to put the Ukraine on a cash basis for their heating gas. A couple of years ago, the Russians turned off the Ukraine's natural gas and those people ended up burning fences and furniture to stay warm.
About seventy five per cent of the gas burned in western Europe comes from Russia. So, they are not willing to rock the boat about the Ukraine. Nobody wants to freeze.
Now it would seem that the US should issue export licenses for natural gas. That would be the logical step. However, I am unsure if the current administration would risk seeing the price of natural gas go up.
Time will tell. However, that stuff is a good asset in the ground. Just hang in there, and things will get better.
I totally agree; but, they knew exactly what they were doing when they drilled these wells. If not the first one, they sure had a very good idea before the follow-up ones. Business decisions are great but the mineral owner should be paid for the shut-in at a rate at least great enough to go by a strawberry ice cream cone while these guys are off counting on the windfall when gas gets to $8-$10 bucks.
This is my opinion and you have a right to yours as well, you know everyone has one just like they have another thing.
Bigfoot, the shut in royalty is noted in the lease contract. It is important when signing leases that they be prepared by a competent mineral lawyer. That would be a lawyer paid by the mineral owner. Those taking the oil company's lease have pretty much shot themselves in the foot.
I am sorry, but everyone has to look out for themselves in this business.
Hopefully, the link will work. At lot of the oil by product from the shale fields is of a lighter nature than what our current refineries are designed to process. We have to wait until the refineries are built or export the product. But federal law prohibits that.
I will AMEN everything you just said: however, I vote for the refineries instead of shipping overseas!
Robert V. Gill said:
Bigfoot, the shut in royalty is noted in the lease contract. It is important when signing leases that they be prepared by a competent mineral lawyer. That would be a lawyer paid by the mineral owner. Those taking the oil company's lease have pretty much shot themselves in the foot.
I am sorry, but everyone has to look out for themselves in this business.