In the Spraberry Trend, of course.
FYI,
Ralpr
Ralpr... so Pioneer gets a little more than $20,500/acre and still retains 60% interest? What an amazing deal!
Jack, Amazing is right! Ralpr
http://m.fool.com/investing/general/2013/02/23/why-you-should-pay-attention-to-this-texas-oil-pla
Great article - FYI. The numbers for the Wolfberry are incredible.
Regards, Ralpr
iPhone
Ralpr... i have a question. If the cline/wolfberry plays have multiple verticle pay zones... does a mineral owner lease specifically for those zones or do you let them drill deep and get paid all the way up? How does this work in the Permian?
Hi Jack, That's a major gripe for sure - when there are multiple zones of pay. The devil is in the details. This is why a Pugh Clause is so important. If there is no Pugh Clause, and a company has the lease held by production (HBP) - they can sell off vertical rights to the other zones or based on intervals, say 5,000 ft to 5,500 ft below ground surface (bgs). Then there is the horizontal rights not covered by a Pugh Clause issues. It makes for very complicated bookkeeping in a hurry. I have this situation, so I can attest it is not simple or transparent at all.
thanks ralpr. i asked about the Pugh clause in the general forum as well. they are fairly common in east texas horizontals... but they seem to be a big problem for oil/gas companies out west. do mineral owners get Pugh clauses out west or get strong armed and lose the negotiation point?
Ralpr... and i forgot to ask about "favored nation provision" will check postings tomorrow.. shutting down computer for the night. thanks
Hi Jack, Sorry I didn’t notice your question until now. I don’t know for the region as a whole, but my family does not have a Pugh Clause on any of our leases - so, the accounting is tricky to say the least. I’ve learned that companies want Pugh Clauses to make their land positions more solid - and that companies may not do bolt on properties if those lands do not have Pugh Clauses. So this worries me a bunch.
If you can expand on the merits to a E&P company of not having a Pugh Clause - I would like to hear it!
Ralpr
I have it on good authority that the Chesapeake Energy acreage in the Midland Basin - Northern Part in the ~400,000 PLUS net mineral acreage parcel has not been sold to date - so they have not divested themselves of all Permian holdings quite yet - and that the acreage is still being peddled.
That’s all I know.
Regards,
Ralpr
Ralpr I know that Chesapeake has some where close to 35,000 acres leased that they did not sell in SE Borden County. The last thing I heard about this property that Chesapeake was looking for a partner to start a drilling program maybe. I know that Apache has expanded North out of Howard County and has a permit to drill just a few miles south of this area.
Richard, thanks for the comment! A partnership sounds fantastic - the drilling carries - partnership concepts sound like best management practices these days. Plus it could accelerate things (that's the usual spiel anyways) - I don't think CHK has sold any of their rigs that I'm aware of.
Today's oil discover sizes not seen since 1960 - The Globe and Mail
This is an very interesting article from our Canadian neighbors. I love the 50B figure - we're looking pretty good, if it works out. The second largest oil field in the World to date?
How about that?
Ralpr
http://m.seekingalpha.com/article/1312171
Chesapeake CEO expects land postion sales for their remaining acreage in the Permian Basin - in the coming months.
Ralpr
Thank you. Richard, read this carefully. Most of the remaining acreage expires this year or next. They are going to try to renew/extend them, or let them expire. Obviously they're more valuable (and they can get their money back) if they renew/extend. In the comments by Dixon, he says they have "dollars for extensions & renewals", so get ready for a phone call in the next couple of months. If I was a buyer, I'd say, here's what I'm paying for the acreage without an extension (if any), and here's what I'm paying with one. Sale is subject to CHK getting the renewals/extensions done.
Glenn our group that has 5/64 of 15,141 acres expires 1-2014 but CHK has a two year option. If they take the option can we ask and make sure that each section is a separate tract were they can not hold all the area under production if they drill a good well? I just hope if they do not take the option that some one will lease the area and eventually drill.
Well, in your case they can probably just exercise it according to the terms in the original lease, and hopefully it wasn't free. They paid many millions to lease the acreage, the only way they recoup any of it is to sell it. That's where there's a bit of leverage for the mineral rights owner, but if you all gave them a free option and they can hold by production, then that is a valuable thing to the investors, but you won't get much of anything until there's a real drilling program. In our case, it expires mid next year, and they have to pay again at same rate. Of course, they can try and negotiate the price, but they don't have legal ability to exercise option at anything except stated rate. So, owners can hold to the deal, or negotiate if they have good information on the lease market that might indicate that they're not likely to get that price when it expires. In any case, looks like there's finally some movement of some kind.
Glenn I do not usually have option years on leases but in this case since there were others in the group that signed their leases before we talked we took the option at the same bonus rate just 2 years instead of three. In Texas how is held by production considered, by spacing unit as in Oklahoma or by total lease?
That's good news, Richard. Looks like you'll all will get paid again in 7 months. Chesapeake is not going to drill. If you read Dixon's comments in the link Ralph provided, he talks about CHK "not being in a position" to drill. The value to them is extending the leases, but the variables are what the current price is for undeveloped acreage, and what the option bonuses that will have to be paid. In other words, CHK has a sunk cost in each of the tracts, and they have a good idea as to what the buyer is going to pay, and they have another cost to extend/renew the leases. Remember, if they let the lease expire, they eat the entire lease cost, so any transaction that lessens that loss, breaks even, or optimally makes money, they would probably do. I don't have a lot of information on prices totally for undeveloped acreage. There are prices that include some production and some undeveloped, but ours and yours would be valued without production. Shell paid CHK I think $3100/acre for the 618k acres back in September, but it included production, so it's not an apples to apples comparison.
I've asked before about the held by production, and someone in another thread said it depended on having a Pugh clause in the lease.