Insights

Acquisitions & Divestitures, Land Management

The San Juan Basin offers many investment opportunities, as it contains the largest coal-bed methane field in the world and ranks second in total gas reserves. This spotlight provides geological facts, current activity and things to know beforehand.

Background

The first oil well in the San Juan Basin spud in 1911, and since then over 40,000 wells have been drilled. Drilling activity was steady from the 1990s until 2008. In 2007, there were over 40 active rigs. Then attention turned to the prolific Marcellus, where gas could be extracted less expensively. In the past 12 months, 135 wells were completed in the Basin. The leading players include BP America, Hilcorp Energy Company, Catamount Energy Partners, and Encana Oil & Gas. 

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Insider, Land Management

As veterans in the oil and gas industry, we know that learning the terminology is vital to navigating lease acquisitions and interpreting title research. Whether you are a newcomer or well-versed in the business, there is never a shortage of learning opportunities. At Cinco, we enjoy providing community and client education on the varied dimensions of land and title work.  We’ve compiled a selection of terms and brief definitions to conveniently help you refresh your knowledge.

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Land Management

When you are actively pursuing an opportunity in the oil and gas industry, whether it’s making an investment in an E&P company, buying minerals rights, or acquiring leases, having access to the right information and the right team to execute is critical from a value and timing perspective. While land management companies provide a multitude of benefits to the market, here are six greatest advantages they offer.

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Land Management

Land administration personnel are in demand again now that deals are happening.

This edition of the Texas Landman field update covers activity in Railroad Districts 1-6. Even though drilling activity has remained flat since my last report, oil prices have edged up close to $60/bbl and held firm above $55/bbl. The increase in  oil prices may be due in part to the Saudi’s keeping their promise to cut production until later next year to speed up the rebalancing of the oil markets. Of course, they may just be trying to boost the price of oil before their IPO of Saudi Aramco later next year.

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Land Management

Billions of dollars are exchanging hands chasing mineral interest and royalties.

This edition’s Texas Landman field report covers activity in Railroad Districts 1-6. Drilling activity has remained flat with 75 rigs in the Eagle Ford, 37 in the Haynesville, 20 in East Texas and 5 in the Barnett as commodity prices stay soft with oil trading between $45-50/bbl and natural gas below $3.00/mcf. During this time, there has been significant A&D activity in East Texas where companies are targeting the gas-rich Haynesville shale.

In our last update, we reported on CCI’s acquisition of Anadarko’s assets for $1bln which included its Carthage upstream assets of 160,000 net mineral acres and midstream assets. In July, Rockcliff paid $550MM for Samson’s Haynesville acreage comprising 210,000 net mineral acres and then acquired an additional 60,000 net mineral acres from an undisclosed seller. 

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Land Management

Successful dealmakers and investors understand the value of getting the right information to evaluate a new opportunity. Likewise, in the oil and gas space, having a solid understanding of a prospective investment play will enhance the quality of the assumptions and help set realistic expectations. This is particularly true when it comes to mineral title, land title and other regional title issues. An informed buyer will always conduct an assessment of title complexity, potential ‘red-flag’ issues, and the length of time it will take to confirm title.

Questions that should be asked, for example, are:

  • How old is the title and what kind of access information will you have to work with during due diligence?
  • What are the costs associated with title due diligence and title curative?
  • How hard will it be to obtain fill-in acreage or hold on to your acreage post-acquisition?
The answers to these questions will vary widely and differ from state to state, or basin to basin, so obtaining the targeted information is important.  Our regionally-focused teams across the United States collaborate with clients to provide this kind of insight at the outset of a deal and throughout the asset management process. The following highlights a sample of common title characteristics of three of today’s most active regions.  
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Land Management

For energy professionals and investors with limited experience in the business of oil and gas land management, the details can seem daunting, or worse, be treated as an “afterthought” to other steps in the E&P value chain. The simple truth is, diligent upkeep of your land and title matters will pay great dividends, both in the short and long term. Poor land management, on the other hand, can lead to loss of acreage, interference with operations and, ultimately, put you at a disadvantage when it’s time to sell your oil and gas assets. 

The following three factors help extract maximum value from an E&P investment:

1) the quality of the title you acquired,

2) the efficacy of your asset management program, and

3) your divestment readiness.  

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Land Management

What landmen should know about this quarter’s E&P transactions in Texas.

The field report for this current issue will cover activity in the Permian Basin, Railroad Districts 8, 8A and 7C, in addition to covering activity in RR Districts 1-6. The Permian is the most active basin with 339 rigs currently running. It is worth noting that in comparison to a year ago, the rig count in the Permian was 141 rigs, less than half what it is today. In a distant second, the Eagle Ford remains active with 75 rigs, followed by Haynesville 37, East Texas 20 and the Barnett 5. This explosion of activity in the Permian was created by massive investments from public and private companies because of the play’s superior economics and low commodity prices. However, Permian acreage comes with a continuous drilling commitment and if left unfulfilled, companies may lose significantly on their investment.

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Land Management

The outlook for Railroad Districts 1-6 remains promising as we look at the decision by OPEX and non-OPEX countries to cut production, combined with the new political climate in the New Year.  Much needed relief has been provided to the gas market this winter with prices nearing $3.50 mcf.  The Texas gas market trends upward as we continue to see increasing quantities of gas shipping to Mexico and to Gulf Coast LNG facilities.  Contributing to this trend, the news of Raven Petroleum’s refinery project in Duval County, Texas with the capacity to process 50,000 barrels/day and store up to 4MM barrels of crude on site. Once complete it will be the first refinery built in the US since early 1970s and it will bring many jobs to South Texas.  In other recent Texas news, TOTAL exercised its preferential right to purchase 75 percent of Chesapeake’s stake in their Barnett holdings where they were originally a 25% non-op joint venture partner prior to this election.  More great news for Texas, Wildhorse Resource Development Corp. successfully raised $400MM in its initial public offering and bought Clayton Williams leasehold in the Giddings field.   Anadarko sold its East Texas assets comprising 160,000 acres and midstream assets to Castleton Commodities for $1 bln.   We have also seen a significant decrease in the number of companies filing Chapter 11 in the last several months.  Many of the companies that previously filed for bankruptcy protection have now reemerged and are shedding their noncore assets while other companies selling assets in RR Districts 1-6 are raising money to invest in their core areas.

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Land Management

The current activity in Railroad Districts 1-6 should be described by the number of companies filing for bankruptcy protection rather than the normal metric of the number of rigs running.   To bring this illustration into further focus, I believe that more companies will file for bankruptcy protection in Texas this year than there will be rigs currently active in the Eagle Ford.  The number of these Chapter 11 companies will be overwhelming and for the companies that were fortunate enough to not file for bankruptcy, they will be a mere shadow of their former self.  Take Chesapeake, the largest and most active producer in the Barnett shale since its inception just announced the sale of their Barnett shale properties to private equity backed Saddle Barnett Resources.  Chesapeake’s market capitalization in just 2 years has fallen from $20.4Bln to $4.7Bln.  The fallout from these bankrupt and zombie companies continues to have a devastating impact on landmen, our families and our industry.  You need only to read the posts on AAPL LandNews in order to gain huge insight on how landmen are faring after 2 years of falling oil prices.  The impact is intense and far-reaching with AAPL and NAPE both experiencing dramatic declines in event attendance and making necessary cuts in order to maintain a balanced budget.

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