STATE BID TRACT RESULTS
Today’s lease sale bids bare or non-existent
By Vickie Welborn
vwelborn@gannett.com
Bids were bare or non-existent at today’s state Mineral Board lease sale, offering another example that the Haynesville Shale big land grab has stalled for the time being.
Of the thousands of acres up for consideration, very few local tracts received attention. And those that did drew bids more reminiscent of pre-Haynesville Shale offers.
Whether today’s low bids were rejected or accepted is still unknown. State Mineral Board Secretary Marjorie McKeithen has not yet returned a telephone call seeking more information on the board’s decision. The Mineral Board meeting started at 11 a.m.
But the tract sheets posted online at 11:16 a.m. easily tell the story. Row after row of posted acreage was marked with a notation of “no bid.”
The only property getting attention were four state-owned parcels that include water beds and bottoms and three separate tracts owned by Northwestern State University, the Caddo Levee District and the Natchitoches Parish School Board.
Bids for the state land ranged from $287 to $787 an acre – a far cry from the $27,700 to $30,000 an acre bids submitted in July. Royalty payments were set at 25 percent.
Classic Petroleum Inc. was the high bidder on most of today’s tracts. It offered $587 an acre, which amounts to a $74,549 cash bonus, for 127 acres of water beds and bottoms shared between Caddo and Bossier parishes. Another 4-acre tract in Caddo drew the same per-acre offer.
A tract of 346 acres that includes Wallace Lake at the DeSoto-Caddo line drew a bid of $787 an acre from Classic Petroleum and $753 an acre from Cohort Energy Co., adding up to a $272,302 cash bonus from Classic Petroleum versus $260,538 from Cohort Energy.
A 101-acre tract in Red River Parish received a bid of $187 an acre, or $18,887 cash bonus.
A 31.1-acre tract owned by NSU in Bossier Parish drew $355 an acre - $11,044.05 cash bonus – from Martin Producing LLC. Royalty payments were set at 22.5 percent.
The Caddo Levee District owns a 147-acre tract that includes land that juts into Wallace Lake at the Caddo-DeSoto line. Classic Petroleum bid $287 an acre, $42,407.12 cash bonus, and Cohort bid $753 an acre, $111,263.28 cash bonus.
Only $100 an acre was offered for a 160-acre tract that the Natchitoches School Board owns in Natchitoches Parish. Classic Petroleum was the sole bidder, offering $16,000 cash bonus.
State agencies whose lands were ignored in the bidding process include the Bossier Parish sheriff’s office Law Enforcement District, Bossier Police Jury, Webster Police Jury, Louisiana Department of Wildlife and Fisheries, Red River Parish School Board, Ware Youth Detention Center, town of Coushatta, Natchitoches Parish Police Jury and school board lands jointly owned by Natchitoches, DeSoto and Red River school boards.
By Vickie Welborn
vwelborn@gannett.com
Bids were bare or non-existent at today’s state Mineral Board lease sale, offering another example that the Haynesville Shale big land grab has stalled for the time being.
Of the thousands of acres up for consideration, very few local tracts received attention. And those that did drew bids more reminiscent of pre-Haynesville Shale offers.
Whether today’s low bids were rejected or accepted is still unknown. State Mineral Board Secretary Marjorie McKeithen has not yet returned a telephone call seeking more information on the board’s decision. The Mineral Board meeting started at 11 a.m.
But the tract sheets posted online at 11:16 a.m. easily tell the story. Row after row of posted acreage was marked with a notation of “no bid.”
The only property getting attention were four state-owned parcels that include water beds and bottoms and three separate tracts owned by Northwestern State University, the Caddo Levee District and the Natchitoches Parish School Board.
Bids for the state land ranged from $287 to $787 an acre – a far cry from the $27,700 to $30,000 an acre bids submitted in July. Royalty payments were set at 25 percent.
Classic Petroleum Inc. was the high bidder on most of today’s tracts. It offered $587 an acre, which amounts to a $74,549 cash bonus, for 127 acres of water beds and bottoms shared between Caddo and Bossier parishes. Another 4-acre tract in Caddo drew the same per-acre offer.
A tract of 346 acres that includes Wallace Lake at the DeSoto-Caddo line drew a bid of $787 an acre from Classic Petroleum and $753 an acre from Cohort Energy Co., adding up to a $272,302 cash bonus from Classic Petroleum versus $260,538 from Cohort Energy.
A 101-acre tract in Red River Parish received a bid of $187 an acre, or $18,887 cash bonus.
A 31.1-acre tract owned by NSU in Bossier Parish drew $355 an acre - $11,044.05 cash bonus – from Martin Producing LLC. Royalty payments were set at 22.5 percent.
The Caddo Levee District owns a 147-acre tract that includes land that juts into Wallace Lake at the Caddo-DeSoto line. Classic Petroleum bid $287 an acre, $42,407.12 cash bonus, and Cohort bid $753 an acre, $111,263.28 cash bonus.
Only $100 an acre was offered for a 160-acre tract that the Natchitoches School Board owns in Natchitoches Parish. Classic Petroleum was the sole bidder, offering $16,000 cash bonus.
State agencies whose lands were ignored in the bidding process include the Bossier Parish sheriff’s office Law Enforcement District, Bossier Police Jury, Webster Police Jury, Louisiana Department of Wildlife and Fisheries, Red River Parish School Board, Ware Youth Detention Center, town of Coushatta, Natchitoches Parish Police Jury and school board lands jointly owned by Natchitoches, DeSoto and Red River school boards.
Views: 35
Replies to This Discussion
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Permalink Reply by Grillin' - MmmMmm on
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All of the comments on this thread are predicated on the lease bonus being the most important part of the lease's value. That's just not the case. The bonus is but a pittance compared to the royalty payments and severance taxes that the state will collect. So, would you take
a) $100/acre today but start generating hundreds of thousands of dollars of revenue within a year
or
b) wait for 2 years for the bonuses to go to $10,000/acre but put off the collection of hundreds of thousands of dollars of revenue for 3 years??
My economics tell me that (a) is the best choice!
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Permalink Reply by Grice on -
I believe the best option is one that serves all people of Louisiana. Instead, we find ourselves being sold out for the all mighty dollar, with little regard for the private landowners. While leasing now may generate an immediate income, it does so at the (future) expense of the taxpayer. When the leasing resumes, I anticipate the low offers accepted by the state, will be used by the O&G companies, as a leverage against the private landowner. Unless you, or anyone else, can offer a contradiction to this potential, my position stands.
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Permalink Reply by Skip Peel - Mineral Consultant on
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If operators were short of leasehold to drill for the foreseeable future, I would agree with Mmmarkkk. And I do see the need to continue infill leasing so that operators can convert leasehold investment to cash flow. Those properties needed for infill reasons should be those most valuable in the current conditions and as such should command prices above the bids of the recent state auction. Since I am unaware of any operators short of leasehold to develop for the foreseeable future, I do not consider that a moratorium on leasing, imposed by landowners or governmental entities, is detrimental to a continuation of the play. If OPEC and O&G companies cut back supply in times of low demand to protect the value of their assets, why should mineral owners not do the same?
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Permalink Reply by The_Baron on
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Very good point mark,
The assumption many people are making when they criticize the sale is that your option b will indeed occur. There is no guarantee that bonus will reach this level anytime soon. Also it is impossible to predict gas prices. Many people also forget that the State essentially double dips, they get a royalty and severance taxes.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Any assumptions or guarantees aside, mineral owners have the right to make their own decisions regarding the development, or non-development, of their mineral asset. GHS provides the facts. The pros and cons. I trust that information and frank discussions will empower mineral owners to make informed decisions for themselves.
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Permalink Reply by Grice on
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I agree with the thought of the current bids reflection on todays economic conditions. However, I find it difficult to comprehend why the state is willing to basically give the state's mineral rights away. There is no legislation that I am aware of, that mandates the state's obligation to initiate the bidding process. Many of the laws only establish the procedures, once those bidding process has commence. Knowing the current economic conditions, I find it borderline irresponsible for the state to open the bidding process, knowing it will not yield adequate returns. If using todays economic decline as a justification, does that not promote the private landowner to offer their mineral rights for pennies on the dollar?
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Permalink Reply by The_Baron on
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The states goal it to encourage exploration. They know the money is in the Royalties and in the states case, SEVERANCE TAXES.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Considering the guidance statements of CHK and other operators, they have many years of leasehold and potential well locations. A moratorium on state bids, resulting from local governmental entities taking their mineral assets off the table, will not significantly impact near term development. Nor state income from severance taxes which are based on production. And if the value of mineral acres available through the state bid auction is indeed "being sold too cheap", then the next monthly auction should see a lot more bidders willing to play at these depressed prices.
GoshDarn, want to go in on a bid?
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Permalink Reply by The_Baron on
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Many of the tracts being bid on are for water bottoms and road rows in active areas. A moratorium would prevent operators from filling in units they intend to drill, I would think this would invite lawsuits against the state as it could threaten a companies chance to drill in areas they have aquired significant leaseholds.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Baron, the examples you mention I consider to be infill leasing. Where an operator has the need that you mention, they can go to the controlling authority, not the state, and request that particular tract be submitted to the state auction for bid. Public tracts placed in the auction process can come from the request of interested parties (operators, land companies, etc.) or from the public entity owning the minerals without any indication of interest. The public entities should place the moratorium on those tracts not requested by interested parties. I doubt that any lawsuit would be filed concerning public tracts not requested for bid. And any public entity receiving such a request and deciding to not place the requested tract in the auction process would probably not be sued unless the request went unfulfilled for some extended period of time.
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Permalink Reply by The_Baron on
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The problem you are suggesting is not with mineral board, but your local governments.
Also, if I was trying to complete leasing in a Unit and petioned for a tract to go up to the mineral board and was turned down for no reason but the possibilty of future greed, I would sue.
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Permalink Reply by Skip Peel - Mineral Consultant on
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One man's perception of greed may be for another man a perception of wise fiscal policy. And responsible stewardship of public assets.
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