MT flirts with records
Elm Coulee tracts top Montana auction, leading to 2nd highest ever average price
For Petroleum News Bakken
While Montana oil and gas lease auction prices softened in 2012, the Minerals Management division of the Montana Department of Natural Resources and Conservation, or DNRC, saw an upswing in its March oil and gas lease auction. The agency sold 10-year leases this month on nearly twice as many acres as in its December auction for an average price per acre of more than three times that in December, nearly setting a new record.
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In the March 5 auction, the division sold mineral leases on 12,596 acres in 25 separate tracts bringing in a total of $1,011,287 for an average price of $80.28 per acre, the second highest ever average price per acre received in a DNRC lease auction. In the December 2012 auction, the division sold leases on 6,482 acres in 29 tracts for an average price per acre of $24.71.
Most of the leases offered in the March auction were in Fallon (1,440 acres), Dawson (3,194 acres), Richland (1,936 acres), Roosevelt (169 acres), Daniels (2,106 acres) and Valley (1,280 acres) counties, all in eastern and northeastern Montana. In addition, there were tracts in Musselshell County in central Montana (1,894), and on the Rocky Mountain Front in Glacier County in northwest Montana (720 acres).
Winning bidsThe actual price per acre ranged from a high of $2,225 that Pine Properties Inc. of Bismarck, N.D., paid for a 9.43-acre tract in Roosevelt County, to a low of $1.50 per acre for tracts in Daniels, Dawson and Musselshell counties. Pine Properties also had the second highest bid of $2,000 per acre for a 160-acre tract, also in Roosevelt County, which was the only other tract from that county in the March 5 auction.
The third highest bid was $450 per acre that G-Sun LLC of Meeteetse, Wyo., paid for a 640-acre tract in Fallon County. All other average prices were less than $100 per acre. The highest bid in the December auction was $230 per acre for a 13.5 acre parcel in Richland County.
Four tracts totaling 1,425 acres in Daniels County did not receive any bids. Those four tracts had been nominated for the auction by the DNRC.
“While the interest in Daniels County was disappointing, we were pleased with the overall level of bidding on tracts in the Williston Basin,” DNRC Minerals Management bureau chief Monte Mason told Petroleum News Bakken.
Although Pine Properties was the high bidder in the March 5 auction, Zone Exploration of Billings, Mont., walked away with the most acreage, leasing 2,634 acres in Musselshell County. Kirby L. Dasinger of Sidney, Mont., picked up leases on a total of 1,283 acres in Daniels and Richland counties. Dallas-based Petro-Hunt and Billings-based Lonewolf Energy Inc. each leased a total of 1,280 acres in Valley and Dawson counties, respectively. Stewart Geological Inc., also of Billings, leased 1,274 acres in Dawson County. All other successful bidders leased between 80 and 681 acres each (see chart).
In perspectiveIn March 2012, the DNRC auctioned leases on 115,568 acres in 273 tracts for an average price of $30.60 per acre. Three months later, the average price per acre in the DNRC’s June auction was $19.07, and in September 2012 the average price per acre was $32.84. The highest-ever average price per acre of $89.64 was set in the DNRC’s September 2008 auction when 121,881 acres were sold in 262 tracts.
This year the March average was bolstered by the two tracts in Roosevelt County that together brought an average of $2,012.52 per acre. “These two tracts are adjacent to recently completed Bakken wells in the Elm Coulee NE field, so we expected they would receive competitive bidding interest,” Mason told Petroleum News Bakken.
One of these wells was an XTO Energy well that had an initial production rate, or IP, of 875 barrels of oil per day, and the other was a three-lateral Oasis Petroleum well that had an IP of 851 bopd. Both wells went into production in 2012.
DNRC data base records go back through 2002 and indicate the $2,225 per acre that Pine Properties paid for the 9.43-acre lease in Roosevelt County in the March 2013 auction was the fifth highest actual price per acre received in DNRC auctions over that period. The highest price per acre paid in a lease auction through 2002 was $5,100 per acre that Headington Oil of Dallas paid for a 2.37-acre lease in Richland County in June 2006. That was followed by a bid of $4,000 per acre from Billings-based Sands Oil Co. for a 2.28-acre tract in Richland County in September 2005. The third and fourth highest actual bids were $2,800 from North Dakota-based Diamond Resources for 640-acre tract in Roosevelt County in June 2011, and $2,500 per acre bid from Brigham Oil and Gas L.P. (now Statoil) for a 234-acre lease in Roosevelt County in June 2011.
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