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Vol. 18, No. 20 Week of May 19, 2013
Providing coverage of Bakken oil and gas

BLM gets bids on only 8%

MT leases reoffered due to lack of payment; Richland tract brings $3,900 per acre

Mike Ellerd

For Petroleum News Bakken

Of the 93,731 acres offered in the Montana/Dakota Bureau of Land Managementís May 7 oil and gas lease auction a mere 7,349, or approximately 8 percent, received bids. Of the remaining 86,382 acres that did not receive bids, 73,699 were in McCone County, Mont., and had been previously let by BLM in an October 2012 auction. But the high bidder on those leases, San Antonio-based Donco Inc., did not pay for them. BLM rules require the agency to re-offer the leases for auction.

The other acreage that did not receive bids in the May BLM lease sale was in Garfield and Prairie counties.

Auction results

Of the 7,349 acres leased, 5,928 were in Montana and 1,421 in North Dakota. Of the 5,928 Montana acres that were leased in the May auction, most were in McCone County which received bids on 5,231 acres. The remaining acreage was in Daniels, Garfield, Richland and Roosevelt counties.

The Montana leases averaged $67.03 per acre. The highest bid was $3,900 paid by Irish Oil and Gas Inc. of Bismarck for a 72-acre parcel in Richland County.

All of the remaining bids on Montana tracts ranged from $2 to $575 per acre.

NovaNRG of Sugar Land, Texas, picked up leases on nine tracts totaling 123 acres in Richland County for an average of $327.85 per acre. NovaNRG also picked up leases in Daniels and Roosevelt counties.

556 Skyline Investments of Chandler, Ariz., paid $394 per acre for a 197-acre tract in McCone County.

Harvey Mineral Partnership LP of Dallas picked up 3,633 acres in six tracts in McCone County, all at $2 per acre.

Limestone Ridge Resources of Chappell Hill, Texas, paid an average of $60.98 per acre for a total 1,001 acres in three tracts, also in McCone County.

Other successful bidders in the May auction were C E Cattle Co. of Miles City, Mont., David J. Steyaert, Jr. of Billings, Mont., and Willis Oil and Gas Inc. of Helena, Mont.

In North Dakota, 1,421 acres were leased in four separate tracts, all in Slope County. Marathon Oil was the high bidder on that acreage, paying between $60 and $500 per acre with an average of $162.47 per acre.

Donco and Shale Exploration

In the October Montana/Dakotas BLM lease auction, Donco bid approximately $13.5 million for the 73,699 acres in McCone County, at an average price of approximately $184 per acre. Donco is the parent company of Texas-based Shale Exploration LLC, which has maintained offices in Billings and Scobey, Mont., and is/was Apache Corp.ís partner in Daniels County, Mont.

As Petroleum News Bakken reported at the time, Shale Exploration had been expanding its footprint in eastern Montana with acquisitions in McCone and Garfield counties.

In July 2012, Petroleum News Bakken reported that Apache had secured a 300,000 net acre share of Shale Explorationís Jayhawk prospect in Daniels County.

In February 2013, Petroleum News Bakken reported on speculation that Apache was looking to divest its Daniels County assets, but that speculation could not be substantiated. Apacheís website does not indicate that the Montana acreage is currently part of its operations.

BLMís noncompetitive lease process

According to BLM spokeswoman Kristen Lenhardt, any tract that is offered competitively in an auction and does not get a bid automatically goes into the agencyís noncompetitive lease sale process which extends over two years. Through the end of the month of the auction, interested parties can file a $390 lease application fee per tract plus a $1.50 per acre one-year advance lease fee, which locks up the lease for 10 years, although the $1.50 per acre lease fee must be paid annually.

The noncompetitive leasing process is conducted on a first-come basis, which means that the first interested party to submit the application gets the lease. However, there is a brief period between the time the auction actually occurs and 4 p.m. the following afternoon during which BLM will accept multiple noncompetitive applications, and in the event they receive multiple applications, the agency will simply conduct a drawing to see which applicant acquires the lease.

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