Louisiana Haynesville Shale Report May, 2011

Louisiana Haynesville Shale
REPORT
Summer, 2011

SPONSORED BY CADDO MINERALS INC. - CADDOMINERALS.COM

Louisiana Haynesville Shale Report

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Well Activity

Benton

Shreveport

Haynesville Shale “Core”

Mansfield

Coushatta

Wells Currently Producing 1,072

Wells Not Yet Producing 626

Wells Permitted 309

Permits for New Haynesville Shale Wells
300 250 200 150 100 50 0 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011E

Louisiana Haynesville Shale Report

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What Landowners Should Expect for 2011
Drilling in the Haynesville Shale is expected to decrease in 2011 due to continued low natural gas prices and competition from more pro table oil plays. A er 2 years of steady growth, permits for new Haynesville Shale wells peaked in September, 2010 and then fell by 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 because the Haynesville Shale Core is shrinking.

14 12
Price of Natural Gas ($)

Natural Gas Prices (U.S.) Production Rate MCF/Day

20,000

Haynesville Shale Decline Curve

10 8 6 4 2 0
2007 2008 2009 2010 2011

15,000

51% Decline After 3 Months

10,000

69% Decline After 6 Months 82% Decline After 12 Months

5,000

0
1 2 3 4 5 6 7 8 9 10 11 12

Year

Months of Production

“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.

Declining Production Rates
The production from Haynesville Shale wells will decline dramatically during the 1st year. The average well declines 69% over the 1st 6 months, and 82% over the 1st year.

Only 1 Well per Section
Haynesville Shale wells are not pro table at current natural gas prices. Until well economics justify drilling new wells, operators will only drill 1 well per section in order to hold the leases.

Lease Expirations
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 much smaller than during the leasing boom of 2008-2009.

Louisiana Haynesville Shale Report

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Landowner Risks
Montana Thrust Belt Cody Gammon

Major US Shale Plays
Williston Basin Greater Green River Basin Uinta Basin HilliardBaxterMancos Forest City Basin Illinois Basin Piceance Basin Pierre Anadarko ArdBasin m Palo Duro Bend ore Ba sin Basin Permian Basin BarnettWoodford Marfa Basin Raton Basin ExcelloMulky Cherokee Platform New Albany Michigan Basin
Appalachian Basin

Antrim

Devonian (Ohio)

Marcellus
Utica

Mancos

Hermosa Paradox Basin Lewis San Juan Basin

Woodford

Fayetteville
Arkoma Basin

Chattanooga Conasauga

Black Warrior Basin

Barnett
Ft. Worth Basin

Valley and FloydRidge Province Texas- Neal LouisianaMississippi Salt Basin

Miles 0 100 200 300 400

HaynesvilleBossier Maverick
Eagle Ford

Sub-Basin PearsallEagle Ford

Rio Grande Embayment

Shale Gas Plays Stacked Plays
Shallowest / Youngest Deepest / Oldest

Basins

±

Hidden Risks of owning minerals in the Haynesville Shale
The oil and gas business is inherently risky, and mineral owners in the Haynesville Shale are not immune to the risks that may impact the value of their minerals, including…

Competition from other Shale plays
If new, emerging shale plays are more pro table than the Haynesville, then well operators will choose to drill in those plays rather than in the Haynesville. (see map above)

Low Natural Gas Prices
Low natural gas prices will continue to suppress the value of Haynesville Shale minerals (see chart on page 3).

Regulations
Tighter regulations on hydraulic well fracturing, spurred on by concerns about protecting drinking water, could be devastating for the Haynesville Shale by driving up the cost of the wells, and reducing their productivity.

Well Operators
Well operators are in total control of the well, including how it is drilled and produced. A poor operator can greatly diminish the value of the minerals.

Shrinking Core
The Haynesville Shale “Core”, which is the area of better production, has shrunk as operators drill more wells. Acreage outside of the Core is in danger of not being drilled, and leases may be allowed to expire.

Louisiana Haynesville Shale Report

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Maximizing Value

“I feel good about my Mineral Ownership, but I’d also

like to better understand my options.”
Minerals are a valuable, but risky, investment. Landowners can protect the value of their minerals, and enhance their personal situation, by converting their minerals into cash, and by using the proceeds to...

(Minerals/Land)
Buy stocks and bonds Fund retirement Pay for education

Cash Fixed Income (Bonds/Pension)

Diversification

Foreign Equities

more value in their minerals than is prudent, and they should consider re-balancing their portfolio by converting some of their minerals into other investments.

Domestic Equities (Stocks)

Should I Sell my Mineral Rights?
You should consider selling your mineral rights if it makes good nancial sense for you to do so. Get more information on selling your mineral rights at CaddoMinerals.com. You can also learn about selling royalties and get tips on leasing your land.

Diversified Portfolio

Taking Control
Landowners can take control of their minerals by asking themselves, "Do

I have plenty of cash with no immediate

If "Yes", then the mineral owner can feel good about retaining their minerals. If "No", then the mineral owner should consider selling all, or a portion, of their minerals, and diversifying their portfolio.

Louisiana Haynesville Shale Report

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Keys to Success

Keys to a Successful Mineral Transaction
A successful mineral sale requires that both the Buyer and Seller are happy with the result.

Fair Price
Agreeing on a fair price is a critical aspect of a successful mineral transaction. Buyers are typically more knowledgeable and objective about the real value of the minerals, while Sellers o en react to their emotions and to local hearsay about valuation. Good communication is required to bridge the information gap to allow a transaction to occur.

Title
Establishing that the seller has good title is key to a mineral sale. The Buyer will research the real property and probate public records to establish “record title”. If record title cannot be established, then other steps may be necessary in order to verify ownership and close the transaction.

E cient Closing
Once a sales price has been agreed to, the Buyer should move quickly to complete the title review process and close the transaction. The payment should be in the form of a bank wire or check. Bank dra s o en take longer.

Good Faith Dealing
It is imperative that both Buyer and Seller deal in good faith in order to complete a successful transaction.

CADDO MINERALS

Cash for Minerals & Royalty Leasing Assistance No-Hassle Quote Phone - Local - 318-490-0427 Toll Free - 877-620-7717 Email - info@caddominerals.com Online - www.CaddoMinerals.com

Haynesville Shale
How Caddo Minerals Can Help You
Minerals and Royalty Buyer Leasing
Caddo Minerals can assist landowners in getting their land leased.

a leader in Louisiana’s

Caddo Minerals is an active buyer of minerals and royalties, focusing on the Haynesville Shale.

Knowledge and Expertise
Our professionals are experts and knowledgeable about oil and gas minerals and royalties in the Haynesville Shale. Because of our deep knowledge about the minerals market, we are able to pay top dollar.

Customer Service
We are committed to serving our customers with the professionalism and respect that they deserve. We move quickly, and we “go the extra mile” for our customers.

Louisiana Haynesville Shale Report

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Questions & Answers

Common Questions about Minerals & Royalty
What are minerals?
Minerals are everything below the surface of the land, including oil, gas, and other hard minerals. Minerals do not include subsurface well water.

What is royalty?
Royalty is the share of revenue that comes to the landowner from the sale of oil and gas produced from under their land or Unit. The royalty percentage is set out in the oil and gas lease.

Can minerals and royalty be separated from the land?
Yes, a landowner can sell their minerals or royalty while retaining the surface of the land.

Can a portion of the minerals or royalty be sold?
Yes, a landowner can sell any portion (eg ¼ or ½) of their minerals or royalty, and retain what they do not sell.

What about inherited property that is shared with other family members?
This is very common, and any family member can sell their minerals or royalty without having any e ect on the other family members.

What is a Net Mineral Acre?
The formula for Net Mineral Acre is ownership interest times tract size. For example, if 2 brothers each own a 1/2 interest in a 2 Acre tract, then each brother would own 1 Net Mineral Acre.

What about Un-leased Land?
Minerals and royalty have value, and can be sold, whether the land is leased or un-leased.

What is a Haynesville Shale Unit?
In Louisiana, Haynesville Shale wells are assigned to a 640 Acre Unit, and revenue is allocated to each landowner based on their ownership in the Unit and their royalty percentage.

Assistance in Leasing
The leasing boom is over in the Haynesville Shale, and oil companies are going to allow many leases to expire over the coming year. Having an active lease is essential for the Landowner to maximize value from his minerals. Identifying the best oil company to pick up the open lease, and negotiating favorable terms for the lease, requires extensive expertise and market knowledge.

We Can Help
Caddo Minerals can help you get your minerals leased. We have years of experience dealing with Oil and Gas companies, and have been successful in getting the best deal for our clients.

Have you considered the benefits of Monetizing your Minerals?
Talk to Caddo Minerals
Fast Closing Lump Sum Payment Local and Trustworthy

Answers
If you decide to go at it alone, Caddo is more than happy to share a friendly conversation and lend you advice on leasing your property. We’re all in this together!

Contact Us
(318) 490-0427 info@CaddoMinerals.com www.CaddoMinerals.com

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