Thursday, August 28, 2008 11:38:34 AM
I think it's been a while since anyone gave the simple version of what's going on with the leases in the urban Dallas/Fort Worth area (Tarrant county), and what Hemi's multi-faceted plan is there. I'm going to try and give the quick low-down for the sake of those who missed all the original discussions.
First, however, one explanation: This is something that doesn't do Hemi any good to be waving flags in the faces of the bigger oil and gas companies. This is the reason why sometimes it feels like the main point of the Tarrant County leases is left out of discussions.
We all know Hemi has a goal in their business plan to continually grow their reserves and make themselves an attractive acquisition... to provoke some larger oil and gas company to buy them up.
Many months ago now, with the foresight to realize that urban drilling in the DFW area was going to escalate, Hemi began a "checkerboarding" plan of acquiring small, but strategically placed leases in and around DFW.
For a company to drill and develop a well in this area, they must have a pool of 20 net acres for spacing.
Hemi's strategy was to make sure they got smaller leases that would absolutely be required to complete those spacing requirements. It could be 1/4 mineral rights in 1/10th of an acre... but if the company wishing to drill there doesn't have even that tiny little sliver missing from their 20 net acres, they can't drill there.
It was never Hemi's intention to develop these leases. But it WAS/IS their intention that the bigger oil companies operating in the area and fighting over land to be able to drill there, should have to come to Hemi and make a deal.
It's not even so much because Hemi wants to get a great deal out of them. It's more that Hemi wants to have their attention. This "gets their foot in the door" so to speak. It brings the attention of the XTO's and the Chesapeake's and the Devon's upon Hemi... and at that time, it gives Hemi a chance to say, "Have we mentioned to you our other activities and reserves to you?" and have a conversation about what Hemi has to offer.
Any royalties that Hemi gets out of these leases, is just a bonus on top of it all.
We already know this strategy is effective, and it has had at least one of these big companies in Hemi's office to talk about the DFW leases, which led to further meetings and further discussions about what Hemi is all about.
It is very effectively putting Hemi on the radar of the big boys, with a great big bright blip.
Eventually, if these big boys want to drill, they will HAVE to come to Hemi.
There you have it.
OH! One other point... Kels has done a GREAT job of posting examples of how hot the leases in Tarrant County are... and in most of the articles posted it's clear to see the values still increasing and the amounts of money being paid to acquire these leases breaking new highs.... but the point of those posts is not to say "Hemi will get this much money", but rather to show how interest is still getting hotter and hotter, and therefore Hemi's strategy is still in play. It's just a matter of time.
The $$ is a bonus. Icing on the cake... but it's not the most important aspect, IMO.
DON'T BLINK!!!!
First, however, one explanation: This is something that doesn't do Hemi any good to be waving flags in the faces of the bigger oil and gas companies. This is the reason why sometimes it feels like the main point of the Tarrant County leases is left out of discussions.
We all know Hemi has a goal in their business plan to continually grow their reserves and make themselves an attractive acquisition... to provoke some larger oil and gas company to buy them up.
Many months ago now, with the foresight to realize that urban drilling in the DFW area was going to escalate, Hemi began a "checkerboarding" plan of acquiring small, but strategically placed leases in and around DFW.
For a company to drill and develop a well in this area, they must have a pool of 20 net acres for spacing.
Hemi's strategy was to make sure they got smaller leases that would absolutely be required to complete those spacing requirements. It could be 1/4 mineral rights in 1/10th of an acre... but if the company wishing to drill there doesn't have even that tiny little sliver missing from their 20 net acres, they can't drill there.
It was never Hemi's intention to develop these leases. But it WAS/IS their intention that the bigger oil companies operating in the area and fighting over land to be able to drill there, should have to come to Hemi and make a deal.
It's not even so much because Hemi wants to get a great deal out of them. It's more that Hemi wants to have their attention. This "gets their foot in the door" so to speak. It brings the attention of the XTO's and the Chesapeake's and the Devon's upon Hemi... and at that time, it gives Hemi a chance to say, "Have we mentioned to you our other activities and reserves to you?" and have a conversation about what Hemi has to offer.
Any royalties that Hemi gets out of these leases, is just a bonus on top of it all.
We already know this strategy is effective, and it has had at least one of these big companies in Hemi's office to talk about the DFW leases, which led to further meetings and further discussions about what Hemi is all about.
It is very effectively putting Hemi on the radar of the big boys, with a great big bright blip.
Eventually, if these big boys want to drill, they will HAVE to come to Hemi.
There you have it.
OH! One other point... Kels has done a GREAT job of posting examples of how hot the leases in Tarrant County are... and in most of the articles posted it's clear to see the values still increasing and the amounts of money being paid to acquire these leases breaking new highs.... but the point of those posts is not to say "Hemi will get this much money", but rather to show how interest is still getting hotter and hotter, and therefore Hemi's strategy is still in play. It's just a matter of time.
The $$ is a bonus. Icing on the cake... but it's not the most important aspect, IMO.
DON'T BLINK!!!!
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