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Shale Play Land Deal Prices Hit New Highs in 2011

by Kenneth E. DuBose on January 2, 2012

The price to play the shale play game increased at a brisk pace in 2011. Prices in the Eagle Ford Shale and Utica Shale  went to levels not seen before 2011.

Typical Eagle Ford Shale deals were hopping along at a few thousand dollars per acre until Chesapeake and CNOOC reached a JV agreement in the fourth quarter of 2010 that broke the $10,000 per acre mark. That set the stage for 2011 where we would see even bigger transactions - Petrohawk acquired by BHP at a 65% premium to its stock price and both the Marathon-Hilcorp Eagle Ford acreage deal and the Carrizo-Gail deal went for for more than $20,000 per acre.

The Utica Shale was the latest play to emerge in major shale development. We also saw a major deal later in the year when Chesapeake’s 2011 Utica Shale JV in the liquids window of the play brought in $15,000 per acre. That was after the company leased its acreage at a price of $1,400 per acre.

There were other deals in gas plays, but over all it has been quiet as we entered the fourth quarter of 2011. Natural gas prices have dropped to approximately $3 per mmbtu while the oil prices has held relatively strong at $100 per barrel.

2012 isn’t shaping up to be a good year for natural gas prices. The NYMEX 12-month strip for 2012 sits at a measly ~$3.30/mmbtu. That’s not a good sign for natural gas royalty checks in 2012.

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