Drilling and producing hydrocarbons from their stable locked up form in shale and rock formations has fundamentally and irrevocably changed the nature and way oil and gas leases are negotiated. There has been a revolution in drilling and completion technology, it has evolved to such a point that operators are now drilling 100% successful, high quality 45 degree API crude oil “gusher” wells in the Eastern Province of the Eagle Ford. With today's enhanced 3-D imaging, operators can predict in advance, down to virtually the last barrel of oil, the EUR of oil reserves they will recover from the Eagle Ford reservoir. What in earlier years was unknowable, or not completely known or well understood, is now 100% predictable and constant. The genie is out of the bottle. There is no secret knowledge to finding and developing tight sands like the Eagle Ford. Operators with acreage in the Eastern Goldilocks zone own a king's treasure of high grade crude oil and they are tweaking the recovery factor up in ever increasing amounts improving their rates of recovery. The economics of the overpressure Eastern Province oil window are mind numbing and we are seeing historic rates of return on investment per well being made. The savvy landowner knows and understands this information and will use it to his advantage in negotiating an oil and gas lease on his land. For the first time in petroleum history, thanks to the combination of the technology of fracking, the consistent nature of the Eagle Ford, and operator information readily available on the internet, the landowner has the advantage over the operator in negotiating a oil and gas lease. The tables have been turned. Through a lot of hard work, due diligence, investigative reporting, and a little luck, I have broken the code and I have provided all Eagle Ford landowners, through my blog, the keys to the Eagle Ford kingdom. Those with the hunger to learn and the willingness to read my blog, now know pretty near as much as the operator does about what kind and just how much oil and gas there is under his land. With the information I have provided on my blog a seismic shift has taken place at the Eagle Ford negotiating table. Landowners are now empowered to negotiate much more favorable leases than they have ever before in history. The landowner is no longer at the mercy of predatory operators. Informed landowners have great power with the information I have provided you through my blog.
What will you do with this powerful economic information I have given you? Will you squander it, or will you use it to stand up to operators and make them pay you a fair price for what your land is worth? I find the saying that you can lead a horse to water but you can't make him drink apropos to the question.
By now you should be keenly aware that there is a minimum of at least 5,000 proved barrels of oil per acre in the oil window of the Eagle Ford. You should also know that there is probably in excess of 15,000 barrels of high grade 45 degree API crude oil under the Goldilocks Eastern Province of the Eagle Ford along the DeWitt - Gonzales County line where production comes from both the upper and lower Eagle Ford. Putting that in dollar terms means: there is proved oil of at least $440,000 per acre at 5,000 boe per acre. That also means there is $1.32 million per acre worth of proved oil where there is 15,000 boe per acre. Of course, I could be wrong about all of this, especially with the recovery factor constantly being tweaked and improved upon, there is the strong possibility that there may very well prove to be far more crude oil ultimately recovered from Goldilocks wells than operators have projected to date, which would render my figures wrong by making them being far too conservative. In writing my blog I have meticulously stuck to the facts, but my hunch is that we are about to see EURs explode higher and far exceed what operators have stated and disclosed to date.
I have been saying like a mantra for a long time now that if you own land in the overpressure oil window you should be able to negotiate at least $30,000 per acre lease bonus and at least 27 1/2% royalty, and even those figures are cheap, dirt cheap for what you own. I understand that it's hard to get your head around such large numbers but you simply have to get it in your head that you are sitting on top of a little Saudi Arabia and the gods have smiled on you and it's not a mirage. Don't squander your fortune by being timid and sheepish when it comes to negotiation. Sheep get slaughtered!
You do a good job of explaining the big picture view to us. I think I understand everything you say but the landman says things that confuse me. Everybody now knows there is a lot of oil in the ground.
ReplyDeleteYou nailed it! You are dead on, bulls eye. The EURs in the overpressure oil window are off the charts.
ReplyDeleteFrom what I see driving around the area, you might be right. But how does that help those of us who leased early? In a way, it is kind of depressing to read how much oil there is in the Eagle Ford. But at least I will be getting some of the money. Now I have to worry and just hope they don't tear my land up.
ReplyDeleteEvery where you look you see the massive invasion of drilling rigs and pipeline work. South Texas is being changed right before our eyes. The oil companies are going to make a fortune. What makes them so greedy and unwilling to give people who own the land a fair deal?
ReplyDeleteGood stuff, thanks.
ReplyDeleteA truly prophetic observation made roughly a year ago. Too bad for the many landowners who didn't trouble themselves to learn what they owned before they signed leases.
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