A 10-year oil and gas lease on a 28.75-acre tract in northeast McKenzie brought in a high bid of $33,000 per acre from Continental Resources at the Bureau of Land Management Montana/Dakota office’s quarterly lease auction held in Billings, Mont., on July 16. That is the highest lease bid received in a BLM Montana/Dakotas lease auction since the Montana/Dakotas office began tracking bids per acre in 1998.
The Oklahoma-based independent and the Bakken’s leading oil producer was also the high bidder in terms of gross dollars during the July 16 auction, paying $22,823,400 for leases on 1,400.21 acres in 13 separate tracts for an average lease price of $16,299.98. That average lease price was also the highest among the 15 successful bidders in the July 16 auction (see chart). Continental paid between $1,000 and $21,500 per acre for the leases in the other 12 tracks it picked up in the July BLM lease auction.
The 13 tracks that Continental picked up in the auction are all in the in the Alkali Creek, Antelope and Elm Coulee fields along Lake Sakakawea on either side of the boundary that divides McKenzie and Mountrail counties.
The previous high bid per acre that the Montana/Dakotas office had received was $19,950 that Slawson Exploration paid in the January 2013 auction for an 80-acre lease under Lake Sakakawea off the east shore of the peninsula in Mountrail County.
The record tract
The record-high tract is in the far northwest corner of the Antelope field in northwest McKenzie County near the county line along the lake. According to North Dakota Industrial Commission Department of Minerals Management Oil and Gas Division records, Continental has an existing well in the area, the Quale 1-1H well, which is a Sanish pool well that had a 24-hour initial production, IP, rate of 1,423 barrels of oil on Feb. 9, 2012. Through May 2013 it has produced a total of 187,974 barrels of oil and 219 million cubic feet of natural gas.
Continental Resources has been actively drilling in the area in recent years. Oil and Gas Division records indicate the company has 42 active and 26 confidential wells across the three fields, and that accounts for approximately one-third of the current activity in the Alkali Creek, Antelope and Elm Tree fields.
While most of Continental’s Antelope field wells are horizontal and were drilled since 2009, several of its active Antelope field wells are vertical wells dating back to the 1950s. One of those wells, the Woodrow Star “A”1, a vertical Sanish pool well which went on production in October 1955, has produced a total of 1,063,276 barrels as of May 2013.
Auction overview
The BLM Montana/Dakotas office rotates the states in which tracts are offered in its quarterly auctions. The July auction offered tracts in North Dakota and South Dakota. Montana and North Dakota tracts were offered in the May 2013 auction.
A total of 4,675.74 North Dakota lease acres in 37 parcels were offered in the auction, along with 14,339.24 South Dakota lease acres in 50 parcels. All of the North Dakota parcels and all but three of the South Dakota tracts were leased. However, three South Dakota tracts in Harding County totaling 476.29 acres, the only tracts in that county in the auction, did not receive bids.
The 37 North Dakota parcels brought in $49,765,100 for an average price per acre of $10,643.26. The 50 South Dakota leases brought in $35,579 for an average of $2.48 per acre. All together, 34,115.26 acres in 87 lease tracts brought in $49,800,679 for an average price per acre of $2,619.02.
The total proceeds of $49,765,100 from the July auction is far above the Montana/Dakotas office’s five-year lease auction average of $15,115,009.10, and is the second highest total over the past five years behind the $66,259,552 brought in from the July 2011 lease auction (see chart here http://bit.ly/166NZvT). The July 2013 average price per acre was also the second highest over the last five years behind the $3,273.30 per acre that bids averaged in the November 2009 auction. But the July average price per acre is far above the five year average of $789.25 per acre.
The 87 tracts sold in the July 2013 auction was above the five-year average of $72.14, but the total of $19,014.98 acres was below the five-year average of $34,115.26.
Other high ND bidders
Second behind Continental in high price paid per acre was TDB Resources of Salt Lake City, which paid $20,000 per acre for a 71.60-acre lease in the Crazy Man Creek field under Lake Sakakawea in southern Williams County. TDB Resources also picked up a 30.20-acre tract in an adjacent section in the Crazy Man Creek field for $16,500 per acre. That section crosses the county line into McKenzie County.
In addition, TDB Resources paid $15,500 for a 98.12-acre lease in the Reunion Bay field along Lake Sakakawea in the peninsula in southern Mountrail County. TDB Resources was also the successful bidder on an 89.50-acre lease under the lake in the Cat Walk field in southern Williams County, for which it paid $8,000 per acre. Overall, TDB Resources picked up leases on 289.42 acres in four tracts for an average price of $14,532.51 per acre.
The third-highest per acre lease price in the July 16 auction was $14,500 that Agri Properties LLC and Bakken Production Inc. jointly paid for an 80-acre tract along the south side of Lake Sakakawea in the Banks field in northern McKenzie County. Agri Properties and Bakken Production, splitting costs on an 80/20 basis, picked up two other tracks, a 16.60-acre tract in McKenzie County and a 6.93-acre tract in Williams County, paying $3,000 per acre for both leases.
Marathon Oil came in with the fourth highest bid paying $14,046.65 per acre for a 267.11-acre lease in the Reunion Bay field. The lease acreage is in two sections that straddle the boundary between Mountrail and McKenzie counties on the west side of the peninsula. That was the only lease that Marathon picked up in the auction. According to Oil and Gas Division records, Marathon currently has 64 wells on active status in the Reunion Bay field with another 20 on confidential status, which accounts for approximately 89 percent of the active wells and 74 percent of the confidential wells in the field.
Fifth among the high bids per acre was the $12,500 that the Einar and Sonja Prestangen Mineral Trust of Watford City paid for a 40-acre lease in the Juniper field in east-central McKenzie County. Oil and Gas Division records indicate only three wells in the Juniper field, one being a Hess Corp. well on confidential status, with the other two listed as Missouri River Royalty Corp. wells. Of those latter two wells, one is listed as plugged and abandoned, and the other is an active vertical well that between 1997 and 2012 produced 21,358 barrels from the Red River pool and since 2010, has produced 2,450 barrels from the Bakken pool through May.
Other successful N.D. bidders
Four other bidders paid $10,000 or more per acre for leases in the July 16 auction. SM Energy paid $12,000 per acre for a 200-acre tract in the Baker field in northwest McKenzie County. SM Energy has several active wells in the area of the lease.
Forestar Petroleum Corp. paid $11,300 per acre for a 240-acre lease in the Williston field just north of the Cat Walk field in southern Williams County. Statoil has a number of active and confidential wells on the sections in which this lease is located, but no other activity appears on the Oil and Gas Division’s website in these sections. Forestar picked up leases on five other tracts in Divide, Dunn and McKenzie counties. All together Forestar paid an average of $6,737.96 for a total of 1,603.29 acres in six tracts.
XTO Energy and Petro-Hunt each paid $10,000 per acre for leases in McKenzie County. XTO paid their $10,000 for a 34.60-acre lease in the Grinnell field in northern McKenzie County where XTO has an existing well that extends north under the lake into the tract. The lease that Petro-Hunt acquired is farther west in the Grinnell field. Oil and Gas Division records show no wells on the section in which the tract is located, nor any laterals extending into it.
Tracker Resource Development III of Denver paid $6,126.04 per acre for a 39.83-acre lease near the boundary between the Ross and Stanley fields in central Mountrail County. Hess Corp. has two wells on the section where the lease is located.
The lowest price per acre paid for North Dakota tracts was $320 that Inland Oil and Gas of Bismarck paid for a tract totaling 320 acres in the Parshall field in southeast Mountrail County.
South Dakota results
Of the 50 South Dakota tracts that were leased in the July 16 auction, 47 were in Fall River County and the remaining two were in Meade County. Hoover & Stacy Inc. of Cheyenne, Wyo., was the high bidder on South Dakota leases paying $15 per acre for 610.08 acres in two of the Fall River County tracts.
Murfin Drilling Co., of Wichita, Kan., picked up the most South Dakota acreage leasing 9,380.94 acres in 25 of the Fall River County tracts, which was also the highest acreage leased by any of the 15 successful bidders in the auction. Murfin Drilling paid $2 per acre across the board for the leases on all of its 9,380.04 South Dakota acres. The remaining 20 tracts in Fall River County were leased by J. Mark Smith Inc. of Beaumont Texas, also for $2 per acre.
James F. Patterson of Salt Lake City was the successful bidder at $2 per acre on the remaining three South Dakota tracts, 423.29 acres in Meade County.
