"Todays Lease Sale Disappointing ....." - The Shreveport Times
Today's lease sale disappointing for area governing bodies
By Vickie Welborn
vwelborn@gannett.com
BATON ROUGE – Cooling of the leasing frenzy associated with the Haynesville Shale was evident today as upfront bonus payments offered for local government owned land in northwest Louisiana was less than half of what some received two months ago.
That means no big pay days for the City of Shreveport, Bossier City, Caddo Parish Commission, Bossier School Board and Bossier Police Jury. Mansfield’s 113 acres also were ignored.
The only one getting a significant pay check for leasing mineral rights will be Northwestern State University. The 367 acres it owns in southeast DeSoto Parish drew one bidder with an overall payment of $4.4 million, which is based on $12,033.13 an acre. Future royalty payments will be paid at 25 percent.
The nation’s economy and the drop in natural gas prices are getting the blame for the lackluster lease sale conducted this morning by the state Mineral Board in Baton Rouge.
But it shouldn’t diminish the long-term impact the Haynesville Shale will have on the region’s economy, said Don Briggs, president of the Louisiana Oil and Gas Association.
“It’s about economics. It’s about competition," Briggs said. "We are in a very, very difficult time. This whole issue is very far reaching. But Louisiana is very blessed to have an investment in (the Haynesville Shale) up there. But certainly prices are being affected, and they have been in the last several weeks."
What’s important to remember, he said, is the long-term investment is not the upfront bonus money. “It’s the 20 years of royalty that will be received over a period of time. That’s where the big profit is,” Briggs said.
Mansfield Mayor Curtis McCoy believes the area governing bodies were hurt in the sale because each had set minimum bids that were based on the offerings of two months ago. In July and August, the low bids were hovering around $27,000 an acre. It was in July that the DeSoto Parish Police Jury received $27,500 for its acreage at the airport, reaping a check of a $28 million, and the Caddo Commission received $30,000 an acre for assorted property, resulting in a payment of $14 million.
Mansfield had hoped to get $20,000 an acre for 113 acres located around the oxidation pond on George Hunt Road. “It was really hot back then, but prices have really fallen. So what we’re going to do is get on the bid list for next month, and we’re not going to set a minimum bid,” McCoy said via cell phone as he traveled back from the lease sale in Baton Rouge. “I was trying to bring home the bacon, but I didn’t get it.”
By Vickie Welborn
vwelborn@gannett.com
BATON ROUGE – Cooling of the leasing frenzy associated with the Haynesville Shale was evident today as upfront bonus payments offered for local government owned land in northwest Louisiana was less than half of what some received two months ago.
That means no big pay days for the City of Shreveport, Bossier City, Caddo Parish Commission, Bossier School Board and Bossier Police Jury. Mansfield’s 113 acres also were ignored.
The only one getting a significant pay check for leasing mineral rights will be Northwestern State University. The 367 acres it owns in southeast DeSoto Parish drew one bidder with an overall payment of $4.4 million, which is based on $12,033.13 an acre. Future royalty payments will be paid at 25 percent.
The nation’s economy and the drop in natural gas prices are getting the blame for the lackluster lease sale conducted this morning by the state Mineral Board in Baton Rouge.
But it shouldn’t diminish the long-term impact the Haynesville Shale will have on the region’s economy, said Don Briggs, president of the Louisiana Oil and Gas Association.
“It’s about economics. It’s about competition," Briggs said. "We are in a very, very difficult time. This whole issue is very far reaching. But Louisiana is very blessed to have an investment in (the Haynesville Shale) up there. But certainly prices are being affected, and they have been in the last several weeks."
What’s important to remember, he said, is the long-term investment is not the upfront bonus money. “It’s the 20 years of royalty that will be received over a period of time. That’s where the big profit is,” Briggs said.
Mansfield Mayor Curtis McCoy believes the area governing bodies were hurt in the sale because each had set minimum bids that were based on the offerings of two months ago. In July and August, the low bids were hovering around $27,000 an acre. It was in July that the DeSoto Parish Police Jury received $27,500 for its acreage at the airport, reaping a check of a $28 million, and the Caddo Commission received $30,000 an acre for assorted property, resulting in a payment of $14 million.
Mansfield had hoped to get $20,000 an acre for 113 acres located around the oxidation pond on George Hunt Road. “It was really hot back then, but prices have really fallen. So what we’re going to do is get on the bid list for next month, and we’re not going to set a minimum bid,” McCoy said via cell phone as he traveled back from the lease sale in Baton Rouge. “I was trying to bring home the bacon, but I didn’t get it.”
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Replies to This Discussion
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Permalink Reply by Dorcheated A1 on -
Ok Skipper will do,
I'm gonna throw you a fastball so be ready I'll save the screwball for myself.
The price on leases will go back up but it's gonna be longer than we hope because of the credit crunch. I would say (and this is just a guessestiment) it will probably be at a minium of 1 year before you see prices rise again to acceptable level's it's gonna take a good while to get credit flowing again. Not to mention the gas prices which now have taken a back seat.
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Permalink Reply by Skip Peel - Mineral Consultant on
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D, I prefer the fastballs. I'm not saying I'll put it in play. just that it beats the heck out of a swing at a screwball. I hope your guesstimate of a year is incorrect but will place no bets against it. Thinking a year out, that might just be a good time line for a concerted effort by the GHS members to push CNG for private transportation. I seem to remember a past post that suggested now and here (NW LA) is a good ground zero for the public to begin the lobbying effort to affect national energy policy in regard to the advantages of natural gas. At least it would give us all something to focus on and discuss while we wait to see how the national economic and energy debates play out. I wonder what affect would come from 7,600+ citizens (GHS members) aggressively active in pushing for a national energy policy that recognizes the unprecedented opportunity that CNG represents.
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Permalink Reply by Dorcheated A1 on
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Skipper,
I'll say you hit one of the wall with that post maybe a triple. I'm all for it let's start with GM their right here.
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Permalink Reply by Snake Stewart on
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The minimum bid thing is something we as a group have wrestled with.We have decided not to set a minimum bid because we wouldnt want to scare any prospects off.If you start negotiations $1,500 less then the national record it certainly doesnt give much room for movment.The groups on the Barnett that have received the big money negotiated for 8 to 12 months.Not 8 to 12 hours!To fully realize the potential for your minerals you must be patient.
As for the public lands......Why not wait for the worst 2 weeks in the history of Wall Street and the downward prices of pre-winter, more supply then demand reserves plus add the fact that they already got more acreage then they can drill.Then watch these company stocks take the nestea plunge! Cant believe they didnt get any bids.They probably threw in a MFNation clause to boot.(chuckle,chuckle) This was the worst possible time to have a bid package out there.I hope they dont cave and take a real weak offer at this point.There should be other forms of revenue without giving away their minerals for next to nothing.
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Permalink Reply by Dorcheated A1 on
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Thanks Bill,
Glad I could put a smile on your face.
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Permalink Reply by Iris on
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Do you think it would have made a difference if bidding had been held in September instead of delayed till October? Not that it matters now and I certainly understand the reason for delay. If they accepted leases for $1 an acre just a few years ago I hope they as well as the individual landowners who haven't leased will wait a little longer. I like the idea of promoting NG for auto fuel.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Though the bid results are certainly a disappointing, but not unexpected, turn of events, the actual bids and bidders are stunning. If you would like to see the auction results, point to INFO at the top of the main page and select LEASE HISTORY from the drop down box. Do not enter anything in the box, just click on "Submit Query" and then scroll through the individual tracts, bids and bidders.
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Permalink Reply by Kassi on
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I met with a group of land owners last night with a combined total of 7,500 acres. I told them to take this time to solidify their group and get educated. They need to realize the stock market is down, the price of gas is down and it is the last quarter of the fiscal year for many companies. Just take a deep breath, band together, learn, get representation and wait. Good things come to those who wait. The price of gas will go up with the onset of winter, the new fiscal year will be ushered in and the stock market (at least for O&G) will begin to stabilize. Then, if you have used this time wisely, you can move forward and get a good lease at a good price and more importantly with good, protective terms.
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Permalink Reply by SharonB T18N R15W S8 on
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DNR - PRESS RELEASE
September-October mineral lease sale nets $43.5 million
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The state Mineral Board collected about $43.5 million at its lease sale for September and October, completed Monday.
The board, which had to double up the lease sale after canceling the scheduled September sale due to the effects of Hurricane Gustav, had 367 tracts up for bid, the most handled in a monthly meeting since 1947. The unusually large number of tracts led the board to split its meeting into two days – Wednesday, Oct. 8 and Monday, Oct. 13.
The first portion of the lease sale, held last week, brought in $18.7 million, with some of that coming from leases in the highly active Haynesville Shale formation natural gas area. The lease sales approved Monday came mostly from the Haynesville Shale area to make up the balance of the $43.5 million total.
Prior to the lease sale in June of 2008, when interest in Haynesville Shale leases began to spike, the highest lease sale collection in the past 10 years had been $17.9 million in March of 1998, and the combined lease total for the September-October lease sales in 2007 added up to about $7.8 million.
Department of Natural Resources Secretary Scott Angelle said the results of the lease sale show interest in the Haynesville Shale still remains strong, with prices offered for leases tied to the Haynesville Shale far higher than were seen in the rest of the state.
For the parishes which have been the primary interest area for Haynesville Shale – Bossier, Caddo, DeSoto and Red River – lease sale prices have averaged about $19,500 per acre for 2008, compared to about $532 an acre in 2007, about $252 an acre in 2006 and about $374 an acre in 2005. For the state as a whole, those per acre averages are about $2,510 in 2008, compared to $532 in 2007, $374 in 2006 and $358 in 2005.
“State and local governments have seen tremendous financial boosts from these lease sales, and that’s before any real production has begun,” Angelle said. “In the long term, once production begins, severance taxes and royalties will continue to contribute to our economy.”
The figures released today show the following totals with regard to activity in the Haynesville area of north Louisiana:
Highest price per acre awarded:
Bossier parish: 1 acre lease @ $28,055
DeSoto and Red River parishes: 53 acre lease @ $15,255
Red River parish: 11.13 acre lease @ $15,255
DeSoto parish: 366.98 acre lease @ $12,001
DeSoto parish: 40 acre lease @ $12,001
The average price per acre for those parishes so far this year amounted to $19,521 as compared to $513 per acre last year, and $252 per acre in 2006.
State Mineral Board Secretary Marjorie McKeithen said that the ongoing investment in developing Louisiana’s mineral resources has delivered beyond expectations for the state even in an environment of decreasing natural gas prices and national credit concerns.
“The state of Louisiana has been on a winning streak, with each of the past four lease sale collections rivaling what we might expect to see as an annual total in recent years,” McKeithen said.
For the fiscal year that began in July, the total collected by the Mineral Board is $186.1 million.
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Permalink Reply by Skip Peel - Mineral Consultant on
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KB, some reports of the auction on Oct. 10 &11 mentioned that the bid information released represented partial results. Most missed that and I thought it odd. The release of 10/15 referred to by SharonB is likely the complete results and includes the bid or bids in excess of $15,000 which was by far the highest bonus reported initially.
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Permalink Reply by The_Baron on
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The full results were on SONRIS the same day as the sale. You can go there for full bid info on all tracts. Also the tract descriptions can be found there as well.
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