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Canadian rights go begging
The latest auction of oil and gas exploration land in British Columbia drew a blank, one of the clearest signs yet that upstream companies are keeping their powder dry.
For the first quarter of this year, sales in the province have fetched barely C$200,000 compared with C$2.8 million in the same period of 2015, which itself was one of the worst on record.
The trend has been copied in Alberta, where sales in the first two months fetched C$11 million, compared with C$63 million a year earlier.
RBC Capital Markets reported that successful bids across the wider Western Canadian Sedimentary basin hit a 23-year low in 2015, with upfront, lump-sum payments known as bonuses sliding to C$351 million from C$1.07 billion in 2014.
Total acquisitions of exploration land rose 24 percent to 4.3 million acres in 2015, but that was primarily the result of first-quarter optimism that oil prices were heading for a strong recovery.
Prediction of lease expirations Gregg Scott, president of Calgary-based Scott Land & Lease, told the Financial Post that many companies are choosing to drill wells at a loss just to preserve their five-year leases, although others are opting to let their permits expire.
He predicted that leases covering hundreds of thousands of acres will continue to expire until oil firms up at about US$50 a barrel, when a scramble to secure rights will resume.
Hardest hit have been junior- and intermediate-sized producers who are unable to raise the capital to invest in land.
For now, the downturn has been dramatic, with land prices in Western Canada slumping 73 percent to an average C$81 per acre in 2015 compared with C$308 in 2014, RBC said.
The average price in Alberta for the January-February period was C$32.34 per acre, compared with almost C$100 in 2014, while British Columbia posted a more dramatic decline to C$32.85 this year from C$1,043 in 2014.
RBC said companies such as Birchliff Energy, Paramount Resources, Seven Generations Energy and PrairieSky Royalty have dominated buyers by acquiring up to two-thirds of the 240,000 acres of leases offered for sale in the past two years.
- GARY PARK
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