Demand for public land in Texas from energy companies has gone up since July 2016, but income from the leases has dropped, reflecting the low oil prices that have left many an energy company cash-strapped and unable to make serious new investments.
According to the state’s Land Commissioner George P. Bush, a total 14,000 acres of Texas public land were auctioned, but income from them came in at just US$5,900 per acre. This compares with US$7,400 per acre in July 2016, when the last public land lease auction was held in Texas.
The total proceeds from the January auction came in at US$84 million, versus US$98 million in July last year, when some 13,000 acres were leased. The money from the auctions is collected in a Permanent School Fund, which helps cover some public school expenses in the state.
The January 2017 proceeds from the auction were still much higher than those from the 2015 summer edition, when the PSF received about US$20 million. The January 2016 auction generated just US$11 million, as it coincided with a trough of less than US$27 for oil prices. That auction also saw much lower acreage leased, at 4,393 acres. This makes the average per acre US$2,500, substantially lower than the going rate for the latest auction.
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According to Upstream, most of the attention of the bidders at the auction was focused on the Permian shale play, and more specifically on the Delaware Basin. This certainly has a lot to do with the latest development in the Permian.
The play is still gaining in popularity, with the last few days seeing two major acquisitions there, by Noble Energy and Exxon, and an announcement by Anadarko that it will exit Eagle Ford to focus on higher-return opportunities, some of them in the Permian.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.