[shallow sand]

This post is directed to ROCKMAN and others in the oil and gas industry.

Shale companies have been selling off product gathering and water disposal infrastructure at breakneck speed in this downturn.

Would appreciate perspectives on this and also would be interested to know if this same thing occurred in prior downturns. What are common leaseback terms? Who buys these assets?

IMO this is very short sighted on the part of these companies, but in our area this just isn't done as we are all too small and no one would want our infrastructure anyway. So maybe my view is more due to unfamiliarity and comparing apples (stripper wells) to oranges (shale wells).

[ROCKMAN]

shallow - It really isn't an infrastructure sell off per say. They are selling producing wells which require including the infrastructure. Would you buy a stripper gas well if it didn't including the flow line to the sales pipeline. Would you buy a well making 30 bopd and 400 bbls of water per day if it didn't include the disposal well on the lease?

Consider why they are selling: you do what you do and make a living. Would you pay an engineer $150,000/year so you could sit in your office all day? Larger companies can't function on a sweat equity basis like you.

[shallow sand]

ROCKMAN. No, they are selling off lower volume conventional separately. Look at Whiting's Q3 conference call.

Whiting has sold 11,600 boepd of production in 2015 and raised $400 million. But now they are getting ready to sell their water disposal infrastructure and then rent it back from the buyer. At least that is the way I read it, but again I may not be understanding what they are selling. A poster on POB worked for a company that owned lease tank battery equipment and charged rent to the lease operator.

I completely agree with you, why would an operator do that, but I think the shale companies are. Since you are near EFS, maybe check around and see if this is what is going on, or if they are selling something else.

Interesting to note the 2015 production selling price, which was over 60% oil. In 2013 they sold 7,600 BOEPD of conventional for over $850 million. They just took a $1.7 billion write down on their North Ward Estes CO2 flood.

[ROCKMAN]

shallow - I might be remembering wrong but most of that SWD system serves many operators...not just their wells. Essentially a comercial SWD subdivision that stands seperate from the production company.