Slightly more interest

Montana DNRC’s June oil and gas lease auction beats March, but not by a lot

Mike Ellerd

Petroleum News Bakken

The average price per acre in the Montana Department of Natural Resources and Conservation Mineral Management Bureau’s June 2 oil and gas lease auction was more than five times higher than the previous auction average in March.

However, at only $8.17 per acre, the June average still ranks as one of the lowest in recent years. There was slightly more interest in the June auction compared to March when for the first time since 1971 not a single bid was received on any of the 35,292 acres above the minimum of $1.50 required for nomination. The June average is the third lowest since the December 2009 auction when 151,911 acres averaged $6.68 per acre.

Of the 19,504 acres leased in the auction, 12,464 acres did not receive a bid and were leased for the $1.50 minimum, but of the remaining 7,040 acres bids ranged from $1.75 to $210 per acre. A 160-acre tract in Roosevelt County in eastern Montana brought the $210 high bid, and an 80-acre Roosevelt County tract brought the second high bid of $195. At a distant third, a 480-acre tract in Sheridan County in northeast Montana leased for $34 per acre while a 640-acre Sheridan County track leased for $33 per acre. A 640-acre tract in Richland County in eastern Montana went for $26 per acre, and a 240-acre tract in Garfield County in central Montana brought $25 per acre. All other bids were $17 or less.

Successful bidders

The high bid came from Fossil Hill Resources for the Roosevelt County tract, the only lease Fossil Hill picked up (see table). The second high bid came from Nisku Royalty on another Roosevelt County tract. Nisku Royalty picked up 1,200 acres in three tracts, all in Roosevelt County, for an average of $20.87 per acre.

Ross Alger Energy picked up leases on three Sheridan County tracts for a total of $43,840, the highest spend in the auction. Those three tracts averaged $24.91 per acre.

Petro-Hunt leased a 640-acre tract in Richland County for $26 per acre; Cline Production was the successful bidder on the Garfield County tract; and Eric Johnson paid an average of $8 per acre for three tracts totaling 1,600 acres in Toole County in north-central Montana. Monkota Petroleum paid an average of $1.83 per acre for 1,440 acres in four tracts in Fallon, Richland and Wibaux counties in eastern Montana.

Big Sky Land and Title picked up the most leases with 12,160 acres in 21 tracts spread across Custer, Dawson, Fallon and Prairie counties in eastern Montana, all at the minimum of $1.50 per acre. In Big Horn County in south-central Montana, Brisco Petroleum picked up a 144-acre lease for the minimum, and Western Natural Gas picked up two 80-acre leases in Hill County in north-central Montana, also for the minimum.

Ten-year comparisons

Since March 2006, DNRC lease auctions have averaged 68,024 acres with an average tract size of 412 acres bringing in an average of $27.97 per acre. That puts the June acreage 71 percent below the 10-year average, the tract size 18 percent above average and the price 71 percent below average.

The highest average price per acre over the 10-year period was in the March 2014 auction when 6,012 acres averaged $266.34 per acre. However, at 6,012 acres, that was the fourth lowest total acreage in any DNRC auction over the last 10 years.

The largest total acreage over the last 10 years was in September 2007 when 202,621 acres were leased. The average lease price in that auction, however, was $5.25 ― the third lowest over the last 10 years.

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