New Mexico's State Land Office cleared $15.47 million from an oil/natural gas lease sale Tuesday, marking the fourth-highest oil/gas lease sale in the state's history and showing the current low commodity price environment has not dampened longer-term development prospects.
A total of 22 tracts comprising 5,446 acres were offered and sold for lease, State Land Commissioner Aubrey Dunn reported. The state's lease sale was timed to coincide with the federal Bureau of Land Management (BLM) lease sale, which brought in first-time bidders and additional money on state trust lands, Dunn noted.
The highest earning tract was 320 acres in Lea County, in an energy-rich extension of the Permian Basin in the southeast corner of the state, which received a sealed bid totaling $4.8 million. The highest oral bid was $7,062.50/acre for a total tract bonus of $2.26 million for another 320 acres also in Lea County.
Noting that prior state administrations had not allowed leasing in the area, Dunn said he offered tracts near the Carlsbad area with "excellent" production potential. "Our strategy to offer tracts concentrated in a high-demand area that is prime for development has really paid off for [state] trust beneficiaries," he said.
While state lease sales have generally brought in smaller proceeds (see Daily GPI, Nov. 28, 2012; March 1, 2012), a federal BLM sale last summer netted $83 million in proceeds for leases on federal lands in four counties in the southeastern corner of the state; 31 leases were for 10 years (see Daily GPI, July 17, 2014).
The New Mexico land office is responsible for administering nine million acres of surface and 13 million acres of subsurface estate for the beneficiaries of the state land trust, which include schools, universities, hospitals and other critical public institutions.