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Permalink Reply by Diana Canady on November 27, 2018 at 13:17

Are these auctions just for the state or are can anybody list a property to be leased? And if so, then 1) is it a good idea? and 2) where do I look to get up to speed on this? Thanks!

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Permalink Reply by Skip Peel - Mineral Consultant on November 27, 2018 at 14:17

Diana, the auction is for publicly owned mineral rights, not private mineral rights. The state owns a lot of minerals as do other governmental entities such as levee boards, school districts, volunteer fire departments, municipalities and parishes.

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Permalink Reply by Diana Canady on November 27, 2018 at 15:34

Thanks Skip. I guess I will just have to wait until they come to me. I am told that patience is a virtue ...

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Permalink Reply by Bob Zimmerman on December 1, 2018 at 5:42

<$657/acre and a quarter royalty>>>

LOL, whatever happened to $125/acre and 1/8th?????

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Permalink Reply by Skip Peel - Mineral Consultant on December 1, 2018 at 6:44

It was an illusion crafted for an area where mineral owners had not seen any serious development activity in many years and had a lengthy history of failed plays.  The perfect storm for savvy mineral speculators. 

For the benefit of full disclosure, the early leasing was quite risky in a play that was undefined as to economics or economic areas.  This isn't a "shale play".  Many owners of large Haynesville Shale acreage leased prior to the public announcement for less than $1000/acre and a fifth royalty.  After the play was announced and numerous companies kicked off competing leasing programs, the royalty quickly went to a quarter and bonuses escalated steadily over a number of months before crashing in late 2008 or early 2009 depending on location.  In addition, the decision to wait things out for better lease terms carry risks for those with very small to modest acreage interests.  With these very large drilling units, operators can withstand a good bit of "open acreage".  So the negotiating position for those small tracts isn't particularly good even after an area has been proven.

As I often say, there is more than enough risk to go around for every interest in an emerging but unproven play.  Every mineral owner needs to exercise some patience, do some research and execute a lease with the understanding that the future is unsure.  Anxiety or anger over what may happen later is a waste of time and unwarranted stress.

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