Wondering about your thoughts on the low bonus amounts for Slope County at the State auction yesterday? Especially compared to bonus' paid at the Aug. 2011 auction.I replied to the comment but knowing that some folks may not read the comments, here is my unedited answer:
With leases, two things: location, location, location; and, timing, timing, timing.My unedited reply is open for discussion, if folks think I'm off base.
First, timing, easier to explain: there are other reasons with regard to timing, but the CHK issue is foremost. Not much more needs to be said.
Location: compare the location of the tracts in Slope County in this auction with the locations in the August, 2011, auction. The "high" bonuses in the August auction in Slope County were in tracts where seismic activity suggests high rate of success; the tracts in this auction, do not. (In both auctions, the tracts in Slope were outside of any designated fields.)
Even within the same county, disparities in bonuses can be significant. Look at the bonuses paid in this auction in Mountrail County. In Mountrail County some tracts went for $10,000/acre; some went for as little as $50/acre. That alone is incredible: $50/acre in Mountrail County, one of the most prolific counties, but it is obvious the prospects are not good on the eastern half of Mountrail County.
One can easily see the results of the state lease sales at this link. Use the drop-down menu to supply the date and submit.
Looks like classic petroleum and pacer energy went head to head at the aug 11 auction and got all the land they were interested in then. If either of these two were interested in more slope acreage they would have nominated back in aug 2011.
ReplyDeleteNeither was winning bidder on any slope tracts at the feb 2012 auction.
Auctions sometimes produce great bargains typically when there is only one interested bidder as eog was in mountrail Cty in 2007 time frame.
Other times it is "two fools met at an auction".
Well said. I had forgotten that. Tracts are selected by those who are interested in bidding for the tracts.
DeleteThat probably fits under "timing, timing, timing" in this case more than "location." With the CHK announcement, things are in flux and probably not a lot of bidders for some of the tracts that came up.
To make the auction, land has to be open and someone nominates it. If part of a county is prospective, and part not, but all is open, the good stuff will be nominated and leased, but the junk may not be. Later someone who knows nothing can see the high prices and open land and nominate it, hoping to get it cheap on speculation.
ReplyDeleteOr, maybe good stuff was leased but not drilled, and now is open.
And bidders circumstances change. Gas is low so the gas players are short of cash. STATOIL has cash and might bid.
It would take quite a bit of knowledge to assess the different prices in different auctions to determine why it happened.
anon 1
That last statement sums it up best: "It would take quite a bit of knowledge to assess the different prices in different auctions to determine why it happened."
DeleteWhiting alluded to this in their presentation yesterday: based on old 3-D seismic information they hit a dry well; using new 3-D technology they drilled in the very same area and had three consecutive great wells.
Although the oil industry is fighting putting their proprietary fracking cocktails up for all to see, I assume the real "money" is in their seismic activity, the expertise of their geologists, etc.
http://fracfocus.org/
ReplyDeleteGood maps and info. Pick a well and look it up. The big companies are in it.
Try ND Stark Whiting Marsh. Cocktail details.
anon 1
Yes, I've had "FracFocus" linked at my "Data Links" page for quite some time.
Deletehttp://milliondollarway.blogspot.com/p/data-links.html
At that link it's easy to find, near the bottom of the page.
Thank you for reminding readers. Now to look up the Marsh.