The Bureau of Land Management says its most recent sale of oil and gas leases in North Dakota totaled more than $17.5 million.
BLM says 40 federal leases were sold Wednesday.
The agency says Williston-based Diamond Resources Co. submitted a record high bid of $34,000 for each acre in a 53-acre parcel in Mountrail County.
Diamond Resources also purchased the highest single-parcel bid at more than $5 million for a 152-acre parcel in Mountrail County.Let's do the math: $5,000,000 / 152 acres = $32,895/acre (rounded).
At least three story lines come from this:
a) now we know why holding leases by production is so important;Diamond Resources is probably buying the minerals for CLR.
b) if the acreage is worth this much, the Bakken operators are going to show some spectacular profits down the road -- no one paid this much for so little
c) this helps investors understand the value of the shares they hold in Bakken operators
According to my FAQ page, question 11:
The late summer QEP/Helis deal may have priced "core" Bakken at $30,000/acre (or more). -- August 29, 2012.I know two people who, when they read this, will be sneezing coffee out their respective nostrils.
The worst case scenario for the sweet spots in the Bakken:
- 8 wells on 1280-acre spacing (four middle Bakken wells, four Three Forks wells)
- EURs of 300,000
- $50/bbl oil
- The arithmetic:
- 8 wells x 300,000 bbls (EURs) = 2,400,000 bbls
- 2,400,000 x $50/bbl= $120,000,000
- $120,000,000 / 1280 acres = $93,750 / acre
- Even with each of the 8 wells costing $10 million, one still comes out to $31,250/acre
- in the best Bakken, EOG, CLR, and KOG are planning on many more than 8 wells/1280-acre unit (see pilot density projects)
- no one thinks 300,000 bbls for average EURs is even close; across the Bakken, the average is closer to 600,000 (according to CLR) and Mike Filloon says that in the best Bakken, expect to see EURs of 1 million bbls
- I doubt anyone thinks oil will average $50/bbl over the next 30 years
- wells are coming down in cost, from $10 million to $8 million
- 12 wells (still way below the current anticipated well density)
- EURs of 450K (still way below the average of 600K)
- $75/bbl (perhaps reasonable)
- same cost per well