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Providing coverage of Alaska and northern Canada's oil and gas industry
March 2010

Vol. 15, No. 12 Week of March 21, 2010

Land bidders bide their time

The run-up to Alberta’s royalty revamp was a mixed signal, with a government land sale generating strong returns, but falling far short of the C$900 million some had anticipated.

The fourth auction of 2010 raised C$168 million, close to half this year’s total to date of C$377 million — edging past the halfway point for the $742 million in successful bids for all of 2009 — from the disposal of leases and licenses covering 628,714 hectares (1.55 million acres) at an average C$517 per hectare. The per-hectare average so far this year is C$602.

Gary Leach, executive director of the Small Explorers and Producers Association of Canada, said each land sale in 2010 has grown in total dollar returns, pointing to a “healthy trend that shows growing optimism about future investment trends in Alberta.”

He said it was possible that uncertainty over the government’s royalty announcement the next day might have deterred some bidders.

But Chris Theal, an analyst with Macquarie Capital Markets Canada, who forecast the inclusion of a vast tract of Devonian Duvernay shale gas prospects in the sale could attract successful bids of C$800 million-C$900 million, said he was “underwhelmed” by the disposal of the shale rights.

As usual, most of the bidding was done by brokers for clients who have five years to disclose their identities, or allow their rights to lapse.

The largest single bid was C$21.4 million for a 4,096-hectare parcel by Britt Resources, while the per-hectare high was C$36,239 by Scott Land and Lease. A large number of other bids exceeded C$20,000 per hectare.

Dave Russum, vice president of geoscience with AJM Petroleum Consultants, said buyers were probably targeting a wide range of plays from shales to tight sand and the hot prospects such as the Cardium, Montney and Duvernay formations.

Russum said advances in drilling and production technologies are yielding new life in oil fields and rocks that were previously viewed as uneconomic.

Greg Scott, president of Scott Land and Lease, which placed bids worth C$65 million, said the results reflected activity throughout the province.

The next sale on March 24 also has extensive postings in the shale region of northern Alberta and will be the first real chance to measure industry response to the new royalties.

—Gary Park






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