State leases are generally the last leases taken after operating companies have largely assembled their private leases. At least one reason for this is that state leases are only effective for one year. If not drilled in that time, the lessee must make an additional bonus payment to extend the lease and the extension is limited to one year. After the second year passes an additional bonus payment is required and no state lease may have an effective period longer than three years. Also of interest to mineral owners in the prospective area, state leases require a minimum quarter royalty. We can revisit that in the future if the first wave of wells are economic.
The auction of June 10 will include 23 tracts in Rapides, Avoyelles and Evangeline parishes covering 1326 acres. The number of tracts is actually more important than the total acreage because these state leases will fill in the missing pieces of the leasehold previously taken from private owners. Traditionally the taking of state leases, particularly this many, signals the start of drilling programs.
So for all those member waiting to see well permits and rigs running on their lands, your wait is almost over. Good luck to all. Here we go.
Skip, thanks for posting and logic behind what this all means. Will be interesting to watch.
You're welcome, RM. That's what Keith pays me the big bucks for - not! LOL! I would like to see some of the other summer months' auctions include tracts further east in Point Coupee (one already on the docket), St. Landry and East and West Feliciana. Then it will be a very interesting second half of 2018.
Yes, state leases are still in fact a form of lease that seems to be going the way of the auk and the dodo - the rental lease. Rentals on state leases are typically paid at 1/2 of the rate of the initial bonus payment.