Monday, December 29, 2008

Leases Hit Four-Year Low

Posted By on Mon, Dec 29, 2008 at 4:21 PM

Louisiana officials are trying to put a positive spin on the state Mineral Board’s most recent oil and gas lease sale, which came in at $1.4 million — $1 million shy of last December’s take — and is the lowest year-end sale since 2004. Sliding crude prices and a dismal national economy have been pegged as culprits for the December slump.

The previous months brought historically high sales, bolstered by activity in north Louisiana, which make the drop even more noticeable. One would have to look back to December 2004 to find a smaller year-end sale, about $952,000. Of the 144 tracts nominated for leasing last week, only 44 drew bids, equating to about 31 percent — also a major dip. Exploration companies typically nominate more tracts than they intend to bid on, but the average monthly activity rate ranges anywhere from 34 percent to 40 percent. Department of Natural Resources Secretary Scott Angelle says this unpleasant news is offset by the impressive run the Haynesville Shale area in northwest Louisiana enjoyed from June to October. Each monthly sale ranked among the top six collection days on record, raking in $35 million to more than $93 million per sale. Although leasing activity has slowed from the summer and fall spikes, 2008 “has still been an exciting year for lease sale collections,” Angelle says. “What should not be forgotten is that the exploration companies that spent all these dollars on leasing will soon be preparing to drill and produce, meaning the potential of jobs, royalties and new taxes in coming years.” Despite the continued fall of oil and gas prices and mounting concerns about the national and global economies, state officials contend the most recent December lease sale is well within the normal variations that were seen in the monthly figures during the five months that preceded the Haynesville Shale boom. For instance, during the first five months of 2008, before Haynesville heated up, the average lease sale collection was slightly less than $2 million. Mineral Board Secretary Marjorie McKeithen says that average is proof that the industry still wants to do business in Louisiana. “The oil and gas industry’s recognition of the changing economic times is evident in its leasing activity,” she says, “but we are still receiving bids and interest in our state.” — Jeremy Alford

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