Replies to This Discussion

Permalink Reply by Martin on April 24, 2009 at 9:19

Skip Peel ---
interesting and useful comments Mr. Peel.

Here's a question, if you have the time. I read in an article posted on this site that the NG spot price was expected to start increasing this fall. Two reasons were given -- the usual seasonal usage for heating and that NG exploration has been greatly reduced (number of stacked rigs will increase for most or all of 2009) and there will be a very low amount of new production coming on line this year and first quarter of 2010. The author predicted NG spot price in the low $7.00 range by the first quarter of 2010. Actually that should be three -- the economy should be staging a come back some time in early 2010.

Sounds plausible to me. But then I've only been watching the NG activity since last summer. Another observation I've read on this site and in the financial news is that NG commodity prices tracks crude oil spot price. Could it be instead that it is general economic activity and the supply of the commodity that drives the prices? i.e. How interchangeable are crude oil and NG in the market place? Hope that makes sense.

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Permalink Reply by Skip Peel - Mineral Consultant on April 24, 2009 at 9:42

Martin. Your questions are sensible and have been discussed on several occasions in great detail by numerous members with varying opinions. If you can't find those archived discussions, ask for some help. Here is an alternative approach to your question. Price is only one driver of development. Many of the larger operators have hedges and collars that pay them guaranteed prices regardless of the spot price. Currently, considerably higher. Hedging has become a huge tool in sustaining capex heavy activity such as developing a new play. In Chesapeake's case they have a "carry" from Plains Petroleum on their drilling costs. The frozen credit markets have been a greater deterrent than price. With a majority of production to come in future years, access to credit now would allow many companies to bet on increased future prices. The shift of natural gas production from conventional resource plays to unconventional ones (shale) will allow the industry to more quickly balance supply to demand in the future. Probably six to ten years. So at that point the wild price swings will be dampened. The price of NG and crude oil decoupled in the seventies by the estimate of some of our experienced members and has become less related with time. When access to reasonable credit terms return, development will move ahead at an accelerated pace. When the global economy improves, that pace will quicken. When the demand exceeds the supply of natural gas, the price will rise. Hope that makes sense.

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Permalink Reply by RAY on April 24, 2009 at 17:43

when the shoe is on the other foot, things look different.

When OPEC use to hold back prodution rates to raise the price of oil, I thought... how evil!

but now, the cutting back on drilling to raise the price of natural gas seems like a ....fine idea!!

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Permalink Reply by Martin on April 26, 2009 at 8:58

Thanks again Mr. Peel....

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Permalink Reply by paula on April 26, 2009 at 16:13

So what is the going rate for acerage here in mansfield? We have 5 and a half acres.

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Permalink Reply by Gone Fishin on April 27, 2009 at 14:22

Hey KB, whats your suggestion in my case. I'm right smack dab in the middle of NFR's play on the nw side of shelby co. 450 surface and 250 mineral acres unleased. about 1 mile west and 1 mile north are 2 wells that are big. so we know the stuff is here. Nfr has come to us a couple of times offering $500./ac should we just sit on it or try to find an independent to go with if they wont come through. or do you think someone like cpk will try to get a piece in their play just for data purposes.

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Permalink Reply by Bob on April 27, 2009 at 18:50

I was negotiating at $1000 per acre and a neighbor signed a lease for $1500/acre. I had land and minerals in Chireno, Tx until July 2008 when we lost the minerals in the sale of the real estate (unbeknownst to us).

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Permalink Reply by jay cheney on April 28, 2009 at 1:22

On my residential properties around Bossier City I was offered $1,500 per acre with a 5 yr 25% with 5 yr option. I said "thanks but no thanks". Anybody else had this experience????

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Permalink Reply by Mike on April 28, 2009 at 4:46

Yeah Jay I was offered the same on properties I have in Bossier City.I guess if everyone turns them down they'll have to up the ante.But a ten year lease is a joke!It was all I could do to remain civil.

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Permalink Reply by Gone Fishin on April 28, 2009 at 4:49

what good does it do anyone if they lease you and do nothing with it or even worse, drill and shut it in. either way you get nothing. At least if you hold out, you still have something to sell right?

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Permalink Reply by kittycatmama on April 28, 2009 at 14:36

We have properties in south Shreveport. We were offered $1500 ac./25%/3 yr. with 3 yr. renewal on April 28, 2009.

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Permalink Reply by El Theo on April 28, 2009 at 15:56

Alright. Here are my circumstances:

I have a little over 4 acres, unleased.
My land is in the Johnson Branch Field in a section not yet drilled (s33,t16,r15)
A pad has just been completed in my section less than 1000 feet from my property.
There is currently seismic work going on with a data collection device on my property.
All my neighbors were previously leased at low rates.
There has been no notification of a unitization hearing at this time.
"Insiders" tell me I'm in a tremendous spot.
A pipeline was just installed right beside this pad.
I am perfectly content to go unleased.

Question: If you were in my shoes, what would you ask for when "they" come a-calling?

I have some ideas of my own, but I'd like to get some "what if's" from the regulars that reside here at GHS! Help a poor guy out!

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