What Landowners Should Expect for 2011
As a mineral owner, what should I expect in 2011?”
Low Natural Gas Prices
Abundant natural gas supplies, caused by development of new shale plays, will continue to depress U.S. natural gas prices.
Louisiana Haynesville Shale Report
Drilling in the Haynesville Shale is expected to decrease in 2011 due to continued low natural gas prices and competition from moreprotable oil plays. Aer 2 years of steady growth, permits for new Haynesville Shale wells peaked in September, 2010 and then fellby 21% in early 2011. Well operators are now only drilling wells that are required to hold their leases. They will not drill development wells until natural gas prices see a substantial increase. Additionally, many leases will expire un-drilled, and will not be re-leased becausethe Haynesville Shale Core is shrinking.
P r i c e o f N a t u r a l G a s ( $ )
2007 2008 2009 2010 2011
Natural Gas Prices (U.S.)
After 6 Months
1 2 3 4 5 6 7 8 9 10 11 12
Months of Production
Haynesville Shale Decline Curve
After 3 Months51% Decline
P r o d u c t i o n R a t e M C F / D a y
82% DeclineAfter 12 Months
Declining Production Rates
The production from Haynesville Shale wells will decline dramatically during the 1st year. The average well declines 69% over the 1st6 months, and 82% over the 1st year.
Only 1 Well per Section
Haynesville Shale wells are not protable at current natural gas prices. Until well economics justify drilling new wells, operators willonly drill 1 well per section in order to hold the leases.
Many leases outside of the Core will be allowed to expire, and may not be re-leased because of poor well economics.
Smaller Royalty Checks
Royalty owners will see smaller royalty checks as the 1st well in the section declines, and no additional wells are drilled.
Lower Lease Bonuses
Landowners with land located outside of the “Core” should not expect to be re-leased. Lease bonuses inside of the Core will be muchsmaller than during the leasing boom of 2008-2009.