Now that annual reports are out, one might be able to find out to what extent one's favorite company is at risk with regard to expiring leases.
CLR has the following amount of Williston Basin leases expiring as of December 31 of the corresponding year (numbers are rounded):
- 2011: 100,000 net acres
- 2012: 124,000 net acres
- 2013: 214,000 net acres
- 100,000 / 1280-acre spacing = 78 wells / 24 rigs --> 3 wells/rig/year -- obviously not a problem
- Unless my calculations are wrong, or I have incorrect data to begin with, CLR has plenty of capacity
Compare with DNR's expiring leases.
keep up the good work .jj
ReplyDeleteThank you for stopping by.
ReplyDeleteThis has been a great day. A great weekend.
I caught the $9,000/acre in Stark County on my own; not reported elsewhere.
A friend suggested I look at expiring leases.
I finally understand the Alberta Basin Bakken.
And I got the April dockets summary posted and noted all the infill wells. That information is incredible.
For those who are interested, I put up a lot of information this weekend.
But figuring out the Alberta Basin Bakken, and catching the $9,000/acre story were the highlights.
Thank you for your support.
Not a problem if clr strategy is to drill in order of lease expiration.
ReplyDeleteWhile an obvious important factor, lease exp is not the only or not necessarily the most important. Remember clr uses Eco pad and I believe in this concept, the rig drills multiple wells in the same spacing unit thereby not expanding hbp by max possible.
I would be curious regarding nog's strategy. Not clear nog's operating partners will share lease priority list so nog will need to fend for itself with no geo or eng. Also, nog must bid high (ie outbid the operating producers) in order to lease as most owners will lease to operators all being equal. On the plus side operators won't break the bank for a few acres per spacing unit as all owners would demand to get matching offer. Interesting situation.
Excellent post.
ReplyDeleteI just posted that concern regarding NOG on the DNR post regarding DNR/leases (moments ago).
With regard to CLR, I had forgotten about Eco-Pads. Two immediate thoughts: if you look at the extremely low number for CLR (3 wells/rig, if I remember correctly), CLR has no problem. If they can't get 6 wells/rig I would be surprised.
The second point, as a percentage of drilling sites, their Eco-Pads account for a very low percentage. I haven't calculated the percentage but I transcribe the daily activity reports on a daily basis (sometimes I get behind, but always catch up) and CLR talks a lot about Eco-Pads, but in fact, has very few on the books at this point, as a percentage.
I have opined that among all the operators in the Bakken, CLR's drilling program is most aggressive -- can you imagine the cash flow for 22 rigs in ND and 2 rigs in Montana! My hunch is that CLR will have a bigger challenge with cash flow than with risk of losing leases. Again, these are my personal subjective thoughts and I won't argue with anyone who has different subjective thoughts.
But all your points are well taken. Thank you very much for commenting. Especially about the Eco-Pads. Think of Hess, with as many as six wells on one pad (or two abutting pads). That will really tie up a rig. My hunch is these guys have it figured out.
I was most interested in "ball-park" figures. If any company is clearly out of the ball-park, that's one thing, but so far, OAS, CLR and DRN are within the park.
But it is so coincidental we both had the very same thought at the very same time with regard to NOG. I'm impressed.
(This lone comment is not checked for typos, and once posted cannot be edited, unless completely removed.)
Yes, I thought a major point of Eco pad was that the rig didn't move off at the drop of a hat. If clr just drills one well, then moves and comes back later to the co pad then it seems to me that a (large) component of Eco pad cost efficiency just got removed. I am sure clr is on top of this. Maybe Eco pad is more for "follow up" drilling especially if leases are exp with "high" top lease costs in the picture .
ReplyDeleteAgain, I wouldn't get worried about Eco-Pads and leases expiring.
ReplyDeleteAs noted above, back-of-the-envelope calculations shows CLR has way more rigs than necessary to take care of their leases. Dividing lease acreage that could be lost and number of rigs, each CLR only has to drill three wells/year. They can easily drill six wells/year, perhaps more. Wells are being drilled in less than a month, but completions take longer due to fracking backlog. Obviously there is time in moving rigs around.
And, again, CLR talks a lot about Eco-Pads, but the fact is that on a percentage basis, there are very few Eco-Pads. There's a lot of things to worry about, but Eco-Pads are not one of those worries. I think the biggest challenge is raising all that cash to operate 24 rigs. Costing $6 million/well x 24 rigs = $150 million.