Jeremy Alford

South Louisiana energy leases dominate monthly sale

by Jeremy Alford

Of the 13 oil and gas leases awarded by the state during its two-day sale that ended Thursday, 11 were located in south Louisiana. It’s the first sign in months that action around the Haynesville Shale area in north Louisiana might be beginning to cool a bit, prompting landmen to look for investments south of Interstate 10.

Overall, the state Mineral Board collected more than $2.6 million from 13 leases statewide covering 1,380 acres. That brings the total collected by the board during the current fiscal year that began July 1 to $25.3 million. It’s a considerable dip when compared to November 2008, when the board brought in $3.5 million for a year-to-date total of $189 million, which is when national interest in the Haynesville Shale area was peaking. That natural gas formation in north Louisiana is expected to become the nation’s top-producing field within the next six years.

When this month’s sale is compared to November 2007, however, which is a more appropriate contrast, the numbers shake out a bit better. Two years ago, the Mineral Board collected $1.1 million to bring the year-to-date total to $14.4 million.

Still, investors left a good deal of land on the table this month. The sale started off with 23 nominated tracts covering more than 19,700 acres. The board ended up selling only 13 leases in 10 parishes, including Caddo, Calcasieu, Iberia, Lafourche, Red River, Plaquemines, Sabine, St. Mary, Terrebonne and Vermilion.

While north Louisiana did record two sales, only one of them was located in the area of the Haynesville Shale natural gas formation. Reaching across Caddo and Red River parishes, that lease went for about $26,000 an acre. That’s a sizeable per-acre figure. Last month, the Mineral Board awarded 23 Haynesville Shale area leases averaging more than $8,300 an acre.

It’s further proof that prices are going up in the shale play, as similar leases averaged nearly $4,800 an acre in July and more than $6,500 an acre in August. The comparison becomes more lopsided when you reach further back. The average lease sale for shale property was about $532 an acre in 2007 and roughly $252 an acre in 2006 — a far cry from the thousands of dollars the same land is commanding today.