Getting the right price per Acre and Who's really getting Rich?

Answer; The O&G Companies. Cities, Parishes and State government!
Chesapeake (CHK) DID have 500,000 acres under lease, bt recently closed on a transaction with Plains Exploration and Production (PXP) in which they sold 110,000 acres to PXP for $3.3 billion. That's $30,000 per acre and establishes that amount as a "Fair Market Value". Without question that was what is referred to as "An arms length transaction" and needs to be kept in mind when negotiating Haynesville leases.

How in the hell can CHK, PXP or any other Oil and Gas operator for that matter, think we should get a penney less than they wanted---and PXP was willing to pay for--those 110,000 acres. Don't let any of those guys try to low ball you with that argument that "your acreage is "iffy", "outside the play", "marginal", "likely non-productive", worth no more than the Joneses leased for $200 and 3/16" and on and on.
If that BS was true why would their client have sent them out there? No logic in that spiel. If everyone --other than "the Joneses" sticks to their guns those guys will get right--with everyone! How fortunate we are to have the lessons learned in the Barnett Shale play. Haste makes wasteisn't just a snappy one liner, recent history has proven that saying to be the truth.

The Louisiana Minerals Board sold state owned mineral acreage for $32,212 per acre. These examples ought to send the message if you have knowledge of the anticipated returns minerals in the Haynesville will bring, you come much closer to getting what you should. Hang in, I know that up front money has a powerful magnetism to it but get YOUR price, not theirs.

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Haynesville, Do I Hear $50,000/Acre?
July 28th, 2008 ndarbonne Posted in Uncategorized | Leave a comment »
Think $25,000 an acre is top of the market for the Haynesville play? Don’t stop there.

When looking at Chesapeake Energy Corp.’s deal with Plains Exploration & Production, one may think acreage prices are “topping out,” says Deutsche Bank Securities Inc. research analyst Shannon Nome in her report “From Shale To Shining Shale: A Primer On North American Natural Gas Shale Plays.”

Instead, “we believe Chesapeake’s monetization was simply motivated by a pressing need for cash, and not a statement that $25,000 to $30,000 per acre is a high-water mark for leasehold values; in fact, we see ample room for rising acreage value from here.”
She estimates for the play a base case of $14-million per-well net present value, incorporating an industry-standard 10% discount rate.

“Assuming a drilling density of 80 acres per well, this would imply an amazingly high pretax net present value of $175,000 per acre. On 60-acre spacing, that value theoretically expands to a stunning $233,000 per acre.

“While these values are eye popping, we note that they are pretax and impute a 100% chance of success, and few operators are likely to lease acreage without applying some sort of risk factor.

“As well, even though IRRs (internal rates of return) theoretically break even at a $175,000-per-acre leasehold price, most companies would find the associated F&D (finding and development) costs—$4 per Mcfe, inclusive of the leasehold—to be unacceptable. Nevertheless, these data points—and sensitivities—support our contention that per-acre prices could very well push up toward the $50,000 threshold—unrisked—before F&D costs would move much above $2 per Mcfe and before IRRs would fall much below 50%.”

Nome’s shale report includes topics “Shales Gone Wild,” “Shale Gas: Play By Play,” “Got Haynesville? Drilling Down On A Red-Hot Emerging Shale Play,” “Rockies Shales: Almost Ready For Primetime” and “Shale Shock: Macro Impact.”

On the Haynesville, she has developed a macro-production forecast for the play, with input from U.K.-based energy-research and –consulting firm Wood Mackenzie.

“Our base-case type well analysis incorporates IP (initial production) and EUR (estimated ultimate recovery) assumptions that appear to be near the midpoint of current industry expectations at 10 MMcfe/d and 7 Bcfe per well, respectively.

“Other key assumptions include a $25,000-per-acre base-case leasehold cost—this is ‘baked into’ the F&D shown and also incorporated within the NPV (net present value) analysis as part of the well cost; 80-acre well spacing—although based on other shale plays, ultimate spacing could tighten to 40 and 60 acres; a $1.50/Mcfe operating cost—potentially conservative based upon recent commentary from operators; and an 80% initial-year decline rate—conservative relative to the 73% figure cited by Chesapeake in a July conference call.”

Nome says Haynesville acreage costs “have risen at a very rapid pace. Lease bonuses in the state of Louisiana were less than $200/acre as of early this year, but quickly jumped to the $5,000 to $10,000 realm shortly following the March play announcements from Petrohawk Energy Corp. and Chesapeake.

“More recently, bids and land transactions have been risen into the $15,000- to $20,000-per-acre range, with a mid-June transaction between Goodrich Petroleum Corp. and Chesapeake pricing out at about $17,000.

“Royalties have stayed steady on the whole, averaging 25% to date.”

Contributing to the shale report is Patrick Johnston, an associate analyst with Deutsche Bank.

–Nissa Darbonne, Executive Editor, Oil and Gas Investor, A&D Watch,
This should bring more involved interest from more major players!

Haynesville Shale Well: 14 Million CFD
August 5 | Chesapeake Energy

Chesapeake Energy announced that their 11 producing wells in the Haynesville Shale are producing a total of 45 million cubic feet of natural gas per day. One of these wells is producing 14 million cubic feet per day after the first week. You can hear detailed statistics about these wells in their second quarter conference call.


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