The vast Rocky Mountains oil and natural gas reserves continue to beckon exploration and production (E&P) companies and a growing group of private entities, but Wood Mackenzie energy analysts said a big question remains: where among these 9.2 million acres is the next Bakken shale, Jonah-Pinedale, Big George coals or Covenant field?
In an Upstream Insight 2007 issued this month, Wood Mackenzie reviewed auction data from sales administered by both the Bureau of Land Management and state governments for oil and gas leases in Colorado, Montana, North Dakota, South Dakota, Utah, Wyoming and northwestern New Mexico between 2004 and 2006. The review focused on the competitive sales only and the bonus dollars paid.
“This list contains a diverse set of entities,” said Wood Mackenzie analysts David Haas, David Richardson and Matt Marshall. “It is important to note that a common practice used by many companies is to use a property trader to acquire acreage. By using an agent, the principal (E&P company) can maintain some level of anonymity. This tactic has the strategic advantage of allowing the acquiring company to conceal areas of exploration interest.”
The Wood Mackenzie energy team updated its 2005 lease sale review of Rockies activity. Key observations from 2006 lease sales and three-year trends found the following:
The top 10 spenders in 2006 represented 39% of the total bonus dollars paid an 18.5% of total acres leased. In order, they were Landgroup, Associated Resources, Hanson & Strahn, Baseline Minerals, Summit Resources, Sonja McCormick, Westcliff Resources, Lonetree Energy, Bill Barrett Corp. and Contex Energy Co.
The Uinta-Piceance Basin, which accounted for 41% of the total dollars spent and 21% of total acres leased, was the location of six of the 10 most expensive leases. Pacer Energy had the Rockies’ highest per-acre bid, but some of the most expensive real estate was on the fringes: Sevier County, UT, at the western border of the Uinta-Piceance Basin, twice drew the attention of International Petroleum. This county contains Covenant field, which was discovered in 2004 by Wolverine Oil & Gas.
Also in the basin is Carbon County, which contains the Drunkard’s Wash coalbed methane field, which is currently being developed by a joint venture composed of ConocoPhillips, Chevron Corp. and formerly by Dominion (which has sold the property to XTO Energy Corp.).
The Greater Green River Basin accounted for 17%of the total dollars spent and 15.5% of the total acres leased. Sublette and Sweetwater counties, WY, each had one lease among the top 10. The Sublette County lease was won by Gadeco LLC, which reported the same physical address as another successful bidder, Grynberg Petroleum.
The third of the top three basins, Williston, accounted for 16% of the total dollars spent and 11.6% of total acres leased, as the potential extension of the Bakken oil shale play continues to generate interest. Here, Headington Oil won a 2.37-acre tract in Richland County.
“The steady decline of expenditures in the San Juan Basin reflects the relative maturity of the basin,” said the analysts. In this basin, the top lease went to T. H. McElvain Oil & Gas, which leased a small parcel in Rio Arriba County, NM, home to the basin’s Ignacio-Blanco gas field, the largest onshore gas field in the United States.
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