Monday, February 4, 2013

Mineral Rights Available For Sale


Amelia Resources LLC Announces the Availability for Sale of Mineral Rights in 40,000 Net Acres in Southwestern Mississippi

THE WOODLANDS, Texas--(BUSINESS WIRE)--Amelia Resources LLC today announces the availability for sale of mineral rights in 40,000 net acres in southwestern Mississippi.

Amelia Resources announced today that it has been retained as a technical consultant to host a data room to market mineral rights across 40,000 net acres (73,000 gross acres) in the updip oil window of the Tuscaloosa Marine Shale (“TMS”) play. The data room will open in late February with bids due April 15, 2013.

Entire Press Release:
http://www.businesswire.com/news/home/20130204005485/en

Tuscaloosa Marine Shale

Wilcox – Frio – Tuscaloosa Sands

TMS Activity Map - Acreage Location
Acreage map with surrounding oil production and 3D seismic surveys


9 comments:

  1. if this play has so much potential (according to all the hype), why is this sale taking place?

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  2. Mark,
    I'm not sure what "hype" you're referring to, but I can't speak for our clients reason to sell. Some believe it's strategic to sell into a good market.

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  3. As a stock trader, I'd never sell a position out if I felt there was more upside potential than downside.

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  4. Mark:

    I do not believe your comparing selling (O& G mineral and development rights) to selling stock is an appropriate comparison at all. In fact it is a very simplistic view that completely fails to recognize the vast difference in the two products being sold.

    When you sell a stock (as a stock trader which you reference yourself as) it is sold and you realize the delta from the price you paid verses price received which could be a profit or loss and you are no longer the owner of the stock.

    When you “sell” O & G mineral and development rights, you are selling “a contract” to another party to develop the resource. In exchange for that contract right, the purchaser most often is required to pay for the transaction with upfront “Bonus Money” and then a secondary continuing payment in the form of a proportion of the production realized from the development to the “seller”. The production payment can last for many years and it is usually where the really big money is made by the “seller”.

    Hopefully, you will now realize that the “seller” typically still has some retained interest in the asset and the “buyer” is under an obligation to perform or lose its rights in which case the seller gets the asset back.

    In “Resource Plays” there typically reaches a point where “sellers” can begin achieving better “contract terms” for both Bonus Money and development requirements that hopefully will provide significant long term continuous payments from production to the “sellers”.

    You typically have 1st, 2nd, 3rd, etc. round sellers in O & G plays. Hmmmm, ponder this for a moment.

    If the 1st round sellers (typically the mineral owners) held out until your stated “more upside potential” was achieved, not the first well would ever get drilled and thus realistically a play could never even see any upside potential.

    So did the 1st round sellers sell because there was no upside? Of course not. They sold because they wanted the upside to begin occurring, so hopefully their pockets would grow fatter.

    There are many other detailed factors that go into when it is time for each respective round “seller” to market their positions that are too lengthy and detailed to cover here that has nothing to do with how good a play is or is not.

    I would also tend to speculate that any potential buyers of these assets will be very sophisticated operators that cannot be easily fooled by the “hype” stockbrokers frequently use to pray on unsophisticated stock buyers so they can make their commissions.

    I hope this information provides some clarity on the huge differences in marketing O & G assets and selling stock. They are completely different critters.

    ~~ John Parker

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  5. What bothers everyone that I know watching the TMS develop is the pullout of Devon coupled with your clients' 2 offerings to sell large leased acreage positions. Should landowners be concerned? How are the producing TMS wells looking on the decline rate side? I am personally seeing many reasons to be optimistic about the TMS. Hopefully the 6 wells nearing completion will quell any negative sentiment resulting from Devon's mediocre results.

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  6. FM:
    I am not overly concerned personally about Devon selling their position. In my opinion their past and continued completions using very low amounts of proppant indicates to some degree that apparently they were never really committed to seeing if the TMS would be economically viable from the start. It might have also simply been they had the wrong technical team handling their TMS operations. I may be wrong, but these are observations to consider.

    I believe the true test will now come from seeing who may pick their acreage up. That is assuming there is enough time left for a new competent large operator to develop the resource. If Devon’s leases do not have enough remaining time, I doubt they will get much interest due to that potentially constraining fact, which would be a deal killer.

    Devon had picked up some pre-leased acreage whose clocks were already winding down and now that they have more information from the wells drilled, they may internally know that it will be too difficult for them to develop the acreage based on the contractual terms of their existing position.

    Other company factors, such as Devon’s acreage and respective contractual commitments in other shale plays may also be a big factor in their decision to sell. They are also selling their Utica acreage while others are very pleased with their Utica acreage. Gulf Port Energy’s first nine wells (for example) in the Utica averaged a peak rate of 787 barrels of condensate per day, 10.85 MMcf of natural gas per day and 1,253 barrels of NGLs per day, or 3,849 Boepd per well assuming full ethane recovery. Gulf Port Energy appears to be very pleased with their Utica acreage, while Devon is selling its Utica acreage position. In fact, Gulf Port Energy has allocated approximately $349 million (83%) of its approximately $420 million FY2013 CAPEX program to Utica development.

    It may make more sense for a new operator entrant to simply let Devon’s leases expire, then go back to the mineral owners and say the play is economically viable, dependent on agreeing to terms that allow us to develop the resource in an economical manner.

    I hope I am correct in my opinion. Maybe I am not, but there is a lot of oil resource in the TMS and lowering D & C costs are very important to its successful development. Other operators are doing much better than Devon on lowering the costs.

    Even if today’s technology cannot quite make it economically attractive, it is highly likely that in a few short years technology advancements will make the TMS boom.

    Time will tell as it always does my friend.

    ~~ John Parker

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    1. Good response. Thanks. I have heard that Devon is very high on their position in the Cline formation in west Texas. Maybe they are going to direct their TMS and Utica resources in that direction. Perhaps they were also about to have to renew a lot of the leases in the TMS as you suggest.

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  7. sounds to me a "sell" here is not the equivalent of divesting yourself of a holding completely, as would be the case of stock trade.

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  8. Mark:

    Glad my post was able to provide some clarity for you.

    ~~John Parker

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