Chesapeake is back at the negotiating table with many Ohio mineral owners. The cash strapped company is looking to alter terms of its leases to allow for 1,280-acre drilling units. That’s double the size of the typical unit (640 acres).
Long laterals are not new in shale plays. The majority of Bakken Shale wells are drilled with horizontal laterals that extend 10,000 ft and much of North Dakota wouldn’t be economic without the mega-units. With improvements in horizontal well control, 0perators are extending their reach beyond 640 acres across many of the U.S. shale plays. While the technical risks of failure rise with longer laterals, companies are able to hold more acreage (lowers land acquisition costs) and access more of the reservoir with a single well (should result in better production rates).
It is simply too early to know if proposed long reach laterals in the Utica Shale are the result of a better understanding of geology or a ploy to hold larger swaths of acreage. While 1,280 units are needed for a commercial well in parts of the Bakken, the need for longer laterals is yet to be determined in other shale plays.
The one bit of intelligence that should be followed closely is well results. If you own enough land to stand firm at the negotiating table, try to wait until production results from extended lateral wells are released. I say “try” because operators will likely renegotiate most leases, in areas like Ohio, before long-lateral wells are ever drilled.
If you’ve been contacted by Chesapeake or any other operator to amend your lease, share your experience at MineralRightsForum.com.
Read more about the Wall St. Journal’s investigation at wsj.com