Oil leases rake in $158 million

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Press Photo by Lisa Call The House Chamber at the state Capitol in Bismarck bustles with bidders vying for mineral leases being sold by the North Dakota State Land Department, Wednesday morning.

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BISMARCK — An oil and gas lease sale at the state Capitol Wednesday raked in about $158 million, doubling in size from a sale six months ago, with McKenzie County leases yielding the second highest total — about $43 million.

The two-day sale held by the North Dakota State Land Department, governed by the Board of University and School Lands, put up about 53,000 mineral acres for lease, less than half of a November 1980 sale, but garnered the largest dollar amount since that time.

Linda Fisher, leasing coordinator at NDSLD, said the amount raised was not normal, but enormous.

“There were people that came to the sale with ($5 million to $7 million) in their pocket and never got to spend a dime of it because they couldn’t get any leases,” Fisher said. “You come to the party with $5 million and you don’t get to spend any of it.”

One buyer, Boston Energy, spent $59 million.

Austin Hunt, a petroleum landman and grandson of William Herbert Hunt, founder of Petro-Hunt, L.L.C., attended the lease sale and said he was astonished at bidding prices.

“The prices were a lot higher than most people expected,” Hunt said, adding bidders anticipated only about half of the collected amount.

The five-year leases are priced per mineral acre and an eight-acre tract in Stark County fetched the highest price — $12,500 per acre.

As the room filled with feverishly- ringing cell phones, bids climbed higher and higher.

A Minot man and a Stark County woman, who requested to remain anonymous, became involved in a bid war for the Stark County tract, located near Belfield.

“That’s just to be able to have a lease,” Fisher said. “That doesn’t count any drilling costs, and there’s all this risk involved and the market ... it’s very scary.”

Anonymity is nothing new in the oil game.

Often times, leases are bid on by a broker on another’s behalf so the actual purchasing company won’t be known until the lease is issued, Fisher said.

Hunt said he cannot say in which counties he purchased leases, but his family has been leasing in the state since the late ’40s and participated in their first well in 1952.

Lease money is due Tuesday and Wednesday, so leases should be issued Thursday, she said.

Held every three months, this week’s sale far surpassed previous sale totals and new faces showed up to take part in the bidding game.

“While there is a lot of regulars that come sale after sale after sale, there were a lot of new people at this sale, too,” Fisher said, estimating more than 40 new people came to bid.

In November 2009, about 59,000 acres were up for sale, raking in about $71.6 million, leaving the average bonus per acre price at about $1,200.

A sale on Feb. 10 featured less acreage, about 40,000, with total proceeds at about $47 million. The average bonus per acre was about $1,200.

Monies collected from the sale go into the school system.

Fisher said the land department’s main goal with sale revenues is to fund kindergarten through 12th-grade education.

County sale totals*

Billings County: 480 mineral acres, $949,000

Bowman County: 320 mineral acres, $32,000

Dunn County: 324 mineral acres, $1.8 million

Golden Valley County: 160 mineral acres, $24,000

McKenzie County: 10,400 mineral acres, $43 million

Stark County: 1,800 mineral acres, $2.3 million

— Information provided by the North Dakota Land Department. *Amounts are approximate

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