Texas Land and Market Update | RR District 1-6 | Q1 2024

Originally published in AAPL Landman Magazine 

The first quarter of 2024 has been painful for companies focused primarily on natural gas exploration and production. The spot price has fallen from $3.36 to $1.69 since my last update. On the Gulf Coast, low gas prices are also affected by huge volumes of associated gas from the Permian flooding the Houston Ship Channel and loss of capacity at LNG terminals along the Louisiana and Texas coasts. The effect of low gas prices can be seen in both oil and gas transactions and drilling activity.

• In April of 2024, Rockcliff Energy sold to TGNR for $2.7B, but in January 2023, it was reported that TGNR was buying Rockcliff for $4.6B until gas prices plummeted and the deal fell through.
• In December, Aethon Energy suspended its drilling venture with Blackstone in Angelina and San Augustine counties, while other Haynesville operators decreased their rig count.

However, this is not deterring pure gas players, Chesapeake and EQT, as they continue to gobble up gas reserves at bargain basement prices in hopes of cashing in as more gas is exported via LNG and markets in the Northeast build infrastructure to transport natural gas to this energy-starved area.

The dream of many energy executives over the years of building a natural gas company to take advantage of this abundant, clean, burning fuel has been around forever. In the 1980s, Boone Pickens was considered a visionary in the oil patch as he built Mesa Petroleum into a pure play-on natural gas company. When this did not work out, he proliferated the panhandle of Texas with wind farms to generate electricity. Of course, there is only one “King of Natural Gas,” Aubrey Mclendon, a landman who built Chesapeake from the ground up to create his empire. We all miss him dearly.

Drilling activity in RRDs 1-6 has slipped slightly as companies in Haynesville and Eagleford respond to the price of gas and practice financial discipline. There have been a few notable transactions and announcements in this area.

• Kimmeridge Energy, which bought Laredo Energy in 2023, attempted to buy out Silver Bow Resources for $2.1B.
• Silver Bow has assets in the same area of the Eagle Ford as Kimmeridge’s Laredo acquisition, but the deal fell through.
• TotalEnergies, an owner of NextDecade’s Rio Grande LNG facility in Brownsville, acquired Lewis Enegy’s non-operated assets in the gas-prone down dip Eagle Ford formation.
• In East Texas, Hilcorp bought XTO’s assets in Freestone, Limestone, Robertson, Leon, Milam, and Navarro counties, comprising 2,800 wells and 336,000 acres.
• Chevron has announced its plan to divest 70,000 acres. This would be part of Chevron’s first step in offloading assets after making multi-billion dollar acquisitions in the last couple of years.

Activity in solar, battery storage, carbon capture, green hydrogen, and other energy sources continues to grow in Texas. These projects require land skills, including site selection, acquisition, permitting, title, lease, and data analysis.

Landmen with experience negotiating with large Texas farmers and ranchers are invaluable to the success of energy transition projects because the best land is often very competitive. I am glad to see AAPL is aggressively embracing these new energy sources through education and NAPE.