“Despite the fact that oil prices have dropped from $110/bbl earlier this year to $92/bbl and natural gas prices are down almost 20 percent from a year ago, oil and gas lease bonus dollars per acre continue to rise across the board,” said David Smith, vice president oil and gas management division at Farmers National Company. Lease bonus dollars reached record levels in 2011, and the upward trend continues. “Farmers National Company has increased the level of negotiated lease bonus dollars for their clients by nearly 13 percent over its past record year in 2008,” said Smith.
States seeing the highest levels of production, and reaping higher bonus rates, are those where new shale formations are being discovered and opened up utilizing newer drilling technologies. Activity is remaining strong, particularly in the shale areas of active states. “As new shale formations are discovered and opened up utilizing new technologies, production and profitability are picking up for many independent oil producers across the country” Smith said. Because of this, oil and high-liquids content areas are still seeing very high lease bonus prices. The strong increases we are seeing can be attributed to active and competitive areas.
Drilling and leasing activity in Texas, Oklahoma and Kansas remain strong pushing the top end prices paid at or near record high rates per acre, said Smith which means that thousands of mineral owners across the country have been receiving some early Christmas presents. The top end lease bonus rates per acre reported in Oklahoma have jumped nearly 20 percent from from 2011 to currently. According to Smith, some of the increased leasing rates in both Oklahoma and Kansas are a result of the expanded Mississippian Lime shale play that has many operators scrambling for acreage and willing to pay top dollar to get the acreage tied up. North Dakota activity has jumped due to the Bakken shale formation that has had thousands of acres leased and drilled in just the past two years causing price increases. Colorado and Ohio have also seen significant jumps in average lease rates with numbers more than doubling, said Smith.
In addition to expanded drilling activity, other key economic factors contributing to rising lease bonus levels in 2012 are the continued uncertainty in the global and domestic economies, as well as political unrest in the Middle East. However, domestic producers are expressing major concerns about the outcome of the November elections in the U.S. and what that will bring to the industry. Those results will have a major impact on leasing, drilling and taxation on the energy industry not only in 2013 but for the next four years.” Smith added.
Farmers National Company, an employee-owned company, is one of the largest independent oil and gas management firms in the country. The company has been serving America’s landowners since 1929 and has the following eight lines of business: farm management, real estate sales and auctions, appraisals, insurance, consulting, oil and gas management, lake management, and national hunting leases. Located in the heart of the nation’s oil and gas production region, the company’s industry experts include Certified Professional Landmen, Registered Professional Landmen, Certified Mineral Managers, Accountants, Division Order and Title Analysts, and Geologists. For more information visit the Farmers National Company website at www.FarmersNational.com .
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