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Titan Walks Away from Southern Lewisville Leases - Low Gas Prices to Blame

Oil and Gas
Posted by LewisvilleTexan on 2012/3/4 19:50:00 (4074 reads)
Oil and Gas

Open in new windowNatural gas operator Titan Operating has said it is abandoning plans to drill wells in Southern Lewisville, where it had leased several hundred acres from 2008 - 2009. In a statement Friday, Titan's V.P. of Operations, Chris Hammack explained:

Titan was successful in leasing several hundred acres of Lewisville resident's minerals and had filed for multiple Ingram gas well permits. Initial development was planned from two urban drill sites. The initial drill site did not receive council approval and Titan withdrew its request for the letter of consent needed from the City of Lewisville for the second drill site. Titan was in negotiations on a third drill site when the company decided to suspend development efforts due primarily to low natural gas prices.

In 2008, the neighborhoods in Lewisville, South of Bellaire, and bounded by Old Orchard on the West, S.H. 121 on the East, and F.M. 3040 on the South began to be leased by Cherokee Horn, which was working with Titan to secure the mineral rights needed. The leases that Cherokee Horn secured were three-year leases with the option of a two-year extension. Many of those leases are expiring now, and many more will expire in June, three years from the date that Central Park Area Neighbors Association's almost 800 members had agreed to leases. Titan will not be renewing those leases.

Titan had planned two drill sites, one (The Ingram site) being on the Southeast corner of Corporate Dr. and Valley Pkwy, and the other (The B&H site) just South of Southwest Parkway, West of S.H. 121. The B&H site went before the Lewisville City Council for a permit, and was denied after record turnout by residents of the local neighborhoods. The Ingram site, even smaller, and more residential, was withdrawn by Titan after seeing the reaction to the B&H permit.

Titan had been looking at locating its wells South of F.M. 3040 on land adjacent to WPX's Cobb pad. That site was acceptable to most who had opposed the B&H and Ingram sites because it was not in close proximity to residential neighborhoods. WPX, (formerly Williams) had not received any opposition to the Cobb, Chen, and ACE sites South of F.M. 3040.

Open in new windowWholesale natural gas prices have been on a steep downward trend over the past year, now hovering around $2.50 per MMBTU. A glut of supply due to intense development of the shale plays without a corresponding increase in demand had caused prices to drop quite a bit, but breakeven prices have been estimated at $4 - $5.

"Your guess is as good as mine on gas prices but like any commodity as drilling slows and supply starts to fall prices will recover slowly," said Hammack. "The development of LNG options will help as well as conversions of some vechiles to CNG at these low prices. But all of these are years away from any real effect I'd say," he added.

If and when gas prices come back up, Lewisville residents would be able to re-lease their minerals to whatever operator might decide to invest in the area. Property owners would have a second chance at a signing bonus.

Earlier this year, WPX finished drilling its last gas well in Lewisville, with no immediate plans to continue with more wells for the same reasons.

Titan has two other well sites in the area that have already been drilled: The Prologis site in Lewisville has 4 wells, and the Hilliard site in Flower Mound.

Lewisville ISD recently reached agreement with Titan to lease the minerals under its Killough LHS North campus to Titan. The terms of the lease specified a 25% cost-free royalty plus $100 per month, shut-in royalty of $100/acre/month, and most-favored nation status. In addition, Titan will reimburse LISD $6,000 per year in which a well was drilled or completed so that LISD can conduct air quality testing. Titan also agreed not to drill any wells closer than 600 feet at the surface to the LISD property.

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