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Permalink Reply by Atlpilot on October 18, 2008 at 3:58

KB, good point. The current status of leasing has everything to do with the state of the economy, and very little to do with the current price of NG. I believe the O&G companies expected gas to drop back down to $6-8, then trend back up during the winter. Over time I expect gas to continue to trend upwards as the years go by, with the occasional up and down spike in price.

I doubt that many of the O&G's based their business plans on $14 NG. More than likely it was in the $8-10 range. As the economy recovers, and it will, I would not be surprised to see lease bonuses in a few years in some areas of the HS between $30,000-50, 000, simply because of the value of the recoverable gas per acre.

As a side note, I live in a small town in Georgia. This town is currently doing a study to convert all of their municipal vehicles to NG. They are part of a group of 30 other small communities in GA that are looking to convert to NG, and plan to do so even if oil comes down because they know oil will eventually go back up. They also plan to make their NG fueling stations available to private individuals . There will be a long term market for the gas in the HS. Don't be discouraged by short term market moves.

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Permalink Reply by Atlpilot on October 18, 2008 at 4:55

KB, I agree with you that so much of this is dependent upon the economy. The current status of leasing activity has everything to do with the current financial crisis as companies in all industries are taking steps to protect themselves. When this passes things will return to the "new normal", whatever that will be, and business will go on. As Warren Buffett says, the time to buy is when everyone is afraid. That is exactly what I believe some of the cash rich large O&G's are getting ready to do.

I believe that the O&G companies expected NG to drop back down to the $6-8 range in the Fall, and then trend back up during the winter season to the $8-10 range. I rather doubt that many of the O&G's based their business plans on $14 NG, but rather on a continued trend toward higher NG prices as the years go by and the economy recovers, as it eventually will.

I would not be surprised to see lease bonus payments in a few years in the $30-50,0000/acre range due simply to the value of the recoverable gas in the HS. Having said that, I would personally prefer to accept a smaller, but fair bonus, and a larger royalty percentage. I believe that in the long run that would be more advantageous to my family due to taxes and inflation.

As a side note, I live in a small town in Georgia. This community is currently doing a study to convert all of their municipal vehicles to NG. This is being done in conjunction with 30 other small cities throughout GA. They plan to convert to NG regardless of the price of oil, as they say that oil will eventually go back up in price. They also plan to make available their NG refueling stations to private individuals for their use.

There will be a market for HS gas in the future. Your land and your HS has value.

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