Looks Like the Party Is Over (At Least for the Time Being)

My brother-in-law was in town from Houston over the weekend. He is a geologist who works deep water projects for Shell. He has been able to sit in on some forecast meetings for his projects and also on some meetings for various inland projects that he might start working on (none would involve any HS projects that Shell is currently involved with).

From the meetings that he has attended, it is his opinion that the industry as a whole is in for some rough times and could be so for an extended time period. He said that there have been numerous projects put on the shelf dust that have a high probability of success because the cost/profit ratio is out of whack and will get even more out of whack as the price of the product continues to decline. He does not see the price stabilizing any time soon unless there would happen to be the mother of all winters this years. Unfortunatley, it appears that global warming will make sure that this doesn't happen.

My family has yet to be approached about leasing our acreage. From the discussion that I had with my brother-in-law as to the cost associated with drilling a HS well, I am apprehensive that we will never be approached about leasing our acreage.

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Permalink Reply by fullofgas on December 5, 2008 at 12:33
Well, I guess I must have closed our lease deal at the right time. Right after we got our check and cashed it, the drilling company decided not to drill until the price increases. But luckily they went ahead and gave what they agreed to give. Sec 28, T16 R13. If we would have waited any longer or held out for anymore dollars, we may have lost it all. Now they probly wont drill for a couple years, but surely before the three years are up. So no royality checks. Have to be happy for the 16500 per acre for a couple of years.
Permalink Reply by Mike McCormic on December 5, 2008 at 13:20
I'm sure most of you have read where the ceo of chesapeak lost millions of dollars becaue he gambled on his stock in chesapeak going higher. It makes sense to me that if a ceo wants his stock price to go higher he could go in to an area like the haynesville shale, gain leases in large acreage posisitions and sale the potential of his company based on the potential in the leases he holds. This would cause the stock price to go up and make big profits for people like the ceo. In chesapeaks case the timing was terrible. The economy went into the tanks and gas prices went down. I think all of us in Sabine parish should realize the high lease prices that was being offered was not normal and if we get a chance to lease our property in the future we should not be so greedy.
Permalink Reply by Snake Stewart on December 5, 2008 at 13:48
With all due respect Mr. McCormic, landowner greed didnt cause the economic downturn nor the plight of the stock of the big boys in this play. If anything, the greed of those CEO's that you speak of, and their roles of the dice, had much more to do with it then anything a landowner could ever do.Trying to chase away any competition is a big reason why leases went the way they did. Plus the value of the minerals themselves.

These guys arent throwing away money just for the heck of it. The value is there when the price of N/G is there. If the price/ value isnt there, dont worry about leasing my minerals.Its a very simple premise. I am actually helping the O&G's put more money into developing this play by not allowing them to lease my land at this time. The less money that they put out in leases, the more they have for drilling.That kinda makes me sound like a fair guy to everyone under a lease ,if you look at it like that doesnt it.

Not greedy. Just someone that isnt in a big hurry to give away probably my only chance at leasing my minerals, for an amount that isnt fair for the Nations largest N/G field . This field is the best chance for us to break out of this depression and to get rid of Saudi influence over our Government. In 3-5 years, when unleaded gas has blown the roof off of the record books again , I wonder what those same minerals will be worth ? Have a good one.
Permalink Reply by gawain on December 5, 2008 at 15:06
KB:

All your points are well taken.

Having said that, shouldn't the "new rule" about landman disclosure (I just did!) apply equally to all professions?
Permalink Reply by Snake Stewart on December 6, 2008 at 4:51
Thank you for your honesty, Mr. G.T. but most of us knew that already.

I take every comment with a grain of salt until I can either prove the comment or prove the man/woman making said statment. I believe for the most part, that acting as a landowner while pushing ones other agenda is what may have ruffled the feathers so to speak. I dont believe you fit into that category but because of the actions of some, the whole seems to be penalized. It isnt fair but neither are the situations that many of us landowners find ourselves in.It is just something that we will have to work on to get through this and live happily ever after.Have a good one.
Permalink Reply by Joel on December 6, 2008 at 3:16
Hi KB,

Shareholders like a CEO who owns a lot of stock in the company. Statistically stocks have done a lot better when CEOs are major owners. What CHK's CEO did was actually even more bullish than just owning a bunch- he borrowed to buy more. So from that perspective it is even more favorable sign for stock owners - "hey this insider thinks the shares are so good, he's borrowed to buy a lot of them."

Not that this is/was a great idea in retrospect - but I thought to let you know the shareholder view of thar particular move would be favorable, rather than calling for tar and feathers.

Best,

Joel
Permalink Reply by Two Dogs, Pirate on December 5, 2008 at 17:22
Aubrey lost over a billion not millions unless you count it as over a thousand million. He roled the dice and hit craps. In 1998 CHK stock went to 75 cents, the company tried to sell but no one would buy. Wasn't long before people in Lafayette were claiming CHK to be a success story for all the leasehold they held. In a short time CHK went from 75 cents to 10 bucks talk about a profit for those that bought at 75 cents. NG prices haven't tanked, oil has tanked but not for long. High lease prices have gone back to the turn of the century, not 2000, I have read about leases going for $20,000 per acre back then. Take the Tuscaloosa trend in the 1970s leases were going for a lot of money, $5,000 per acre and up. Back then you could buy a new Lincoln or Cadalac for that, what will one cost you today. The people of NW LA are not greedy and not stupid but for you, you may want to go ahead and lease you shale rights for $1,000 per acre.
Permalink Reply by Two Dogs, Pirate on December 5, 2008 at 17:37
KB, you are at the top of my chart for being one of the most hard working people, if not the most hard working person on this site. You have spent countless hours doing research for free. You have taken me under your wing and helped me stay out of trouble ever since I signed onto gohaynesvilleshale.com. Thanks, I owe you the best steak in Shreveport, with plenty of Bourbons to go with it.
Permalink Reply by Two Dogs, Pirate on December 5, 2008 at 17:52
I will buy the steak and bourbon, mine cheap, if they have it, and yours high dollar. I will drink 3 to 1 on you. Sounds like a bargain in bourbon terms.
Permalink Reply by Two Dogs, Pirate on December 5, 2008 at 18:09
Seems like I saw a 60 oz Porter House at the Horseshoe? Has anyone had this one? KB, you think we could do a 60oz steak and a fifth of cheap and a pint of expensive bourbon. Doesn't really matter to me about the price cause I owe you.
Permalink Reply by Harold5011 on December 5, 2008 at 14:39
Shell's deep water exploration team bought into global warming ?
Permalink Reply by Mattie on December 6, 2008 at 14:43
So, Is Shell going to shut down their activity after drilling their last wells?

Also, are they continuing to tite-hole info on the Harris and other surrounding wells? I have not heard anything about their success or failures lately....knew they had trouble early on, but no new news.

What's up?

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