Monday, October 20, 2008

Bonuses Not Going Up Any More

With all of the chaos on Wall Street and the pressure on the natural gas drilling companies, you have seen lease bonuses peak in the Haynesville Play. They won't go back to zero, but the daily news of the next rich bonus is over. At least for a while.

While it hasn't been stated, the writing is on the wall. Chesapeake Energy cut back approximately 25% of its leasing staff. Petrohawk, Chesapeake and others are scaling back their capital expenditures. They need to drill the leases they have to hold them, so, while they may want more land, they can't take down more than they can drill in 3-5 years. The pressure is on from Wall Street to show returns for all of the eye popping leases these companies have signed. With the price of natural gas hovering below $7, the pressure is doubled.

This isn't doomsday, but most of these companies are moving from the leasing phase to the drilling phase. There will be new leasing, but it won't be making the headlines.

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