The state completed its oil and gas lease sale for January last week, and the results confirm once again that industry interest is dwindling as the national economy continues its downward trend. The Louisiana Mineral Board collected $881,000 for the month, the weakest January sale on record for at least the past 13 years. In fact, the previous five-year average for January—$2 million per monthly sale—was more than double what was pulled down last week. Of the 76 leases that were up for bid, 58 were never acted on. To find a similar disparity for the month, you would have to go back to the January 2004 sale, when 59 of 80 leases received no bids.
Adding insult to injury is the revelation that this may very well be a trend. The December sale came in at roughly $1.4 million last month, which was $1 million shy of the December 2007 take and the lowest year-end sale since 2004.
Mineral Board Secretary Marjorie McKeithen says it difficult to ignore how successful Louisiana’s lease sales have been during the current fiscal year, despite recent activity—or lack thereof. “Historically, January is always a bad start for us, but it’s naive not to realize that the credit crunch and the national housing crisis are not having an impact at this point,” McKeithen says. “Also, I think with all of the money spent on the Haynesville leases there was going to be a tightening of the market. I think you’re going to see all of these companies starting to focus their resources on drilling what they have already leased.”
For the fiscal year that ends July 1, the state has collected $192 million to date. It’s a record-breaking figure, eclipsing all other collections in recent memory. It’s all due to an impressive run in the Haynesville Shale area 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. That peak is clearly over.