Companies make million-dollar bids to drill on state land

Investing in Oil, loan, Private Equity. oil

Two oil and gas companies recently paid more than $1 million each for the right to drill on state-owned land.

The payouts are the highest for state land since at least 2011. The data comes from the Commissioners of the Land Office, the state agency that manages government property.

Paloma Partners IV, an operation by Houston-based Paloma Resources, paid $7,000 an acre for 160 acres in Kingfisher County northwest of the Oklahoma metro. For such a large swath of land, that price is also the highest per-acre signing bonus accepted by the state in the past six years.

In all, the company spent $1.12 million to acquire mineral rights in Kingfisher County.

In February, another company won 40 acres of drilling rights in Garvin County at more than $13,000 an acre. Like any other drilling rights transaction, the state will get royalties from any oil or gas produced on site.

While the bids seem high compared to historical data, analysts say they’re becoming common among private landowners in the part of Oklahoma known by the industry as the SCOOP and STACK.

“I don’t see those as extremely high prices or anomalies with what’s going on,” said Gib Knight, an industry investor and founder of Oklahomaminerals.com. “Certainly, they may be above what has been common for some of the mineral owners, but typically (Commissioners of the Land Office) leases sometimes go higher because it’s a bidding process.”

Last year, Oklahoma made $22.5 million by selling drilling rights, not including any production royalty payments. In 2011, drillers paid the state $83 million for leases.

The other company that made a big bet last month was Armor Energy LLC, a Tulsa company. It acquired the rights to quarter-section parcels in Caddo County near where the SCOOP and STACK meet. Armor paid $6,501 per acre, a price that piqued the interest of Jay Freede, Oklahoma chapter treasurer of the National Association of Royalty Owners.

Overall, though, Freede said the state’s awards reflect the money being paid to private landowners and mineral rights holders.

“It’s not that big of a surprise to me,” he said. “That’s pretty consistent with what royalty owners are getting in that area. As a matter of fact, I’ve known people who’ve leased for more than that.”

Knight said competition has risen in the area and private investors are moving in, even as the price of oil remains about $45 per barrel.

“I’m not sure prices are going to go backwards anytime soon. Certainly the price of oil dictates in the long term what people pay for assets,” he said.

Freede knows a farmer in far north Kingfisher County was paid more than $10,000 per acre for drilling rights.

“You’ve probably got some people with money, they’ve got some equity or investment partners and that’s what’s driving this stuff up,” Freede said. “$1.1 million for a quarter-section, yeah that’s a lot. That’s Kingfisher County.”

SOURCE:Dale Denwalt – NewsOK

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About Oklahoma Minerals Founder GIB KNIGHT

Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma.


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