08/16/2011 Star Telegram

Gas leases, offer prices plunge since 2008 peak

By Jack Z. Smith
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*The current leasing volume is less than one-fifth that of peak months during the spring and summer of 2008. There's still considerable Barnett Shale leasing activity in Tarrant County, but it's a fraction of what occurred during the leasing frenzy of 2007 and 2008, and lease offers are far less attractive because of low natural gas prices.

In the first seven months of 2011, an average of 3,345 leases per month have been filed with the Tarrant County clerk's office, according to a report Monday in the Powell Shale Digest, which chronicles developments in the Barnett Shale.

The monthly average is unchanged from 2010, digest Publisher Gene Powell said in an interview.

The current leasing volume is less than one-fifth that of peak months during the spring and summer of 2008, when skyrocketing natural gas prices at one point topped $13 per 1,000 cubic feet, compared with today's prices of about $4.

A record-high 18,198 leases were filed in May 2008 in Tarrant County.

Much of the current activity includes energy companies "filling in the unleased acreage in drilling units" and leasing properties where leases have expired, Powell said.

Typical lease offers might be $2,000 to $3,000 per acre for bonuses and 20 to 22 percent for royalty rates, Powell said. That's a huge drop from bonuses of $25,000 to $30,000 an acre and royalties of 25 to 27 percent before gas prices began cratering late in 2008.

Mark Caffey, CEO and owner of The Caffey Group, a Fort Worth leasing firm, said that Chesapeake Energy is "the big kahuna" in current leasing activity and that XTO Energy and Carrizo Oil & Gas are also active.

Caffey said his firm has been busy in North Richland Hills, Bedford and Hurst, where he said, "we've been buying five-year leases at $3,000 an acre [lease bonus] with a 20 percent royalty. ... We're using our own money to try to develop drilling projects."

Jack Z. Smith, 817-390-7724

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