State’s oil and gas lease sale brings $30 million to Wyoming coffers

March 24, 2017

Wyoming earned close to $30 million last week, the most it’s made in an oil and gas lease sale since the height of the boom in 2011.

In its first online auction for nominated leases on state land, the Office of State Lands and Investments offered 85,882 acres in 192 parcels, all of which were sold.

The auction, which closed March 8, was considered a success by state officials who were eager to stoke revenue for Wyoming during the oil, gas and coal downturn that’s squeezed state income.

The revenue will be divided three ways. The Common School fund will receive $26,262,245. Public Buildings at the Capitol will get $1,803,518, and $1,477,963 will go to the Farm Loan Fund.

Why this sale was so successful is hard to pin down, said Jason Crowder, assistant director for trust land management.

“Overall the bids were higher, and we sold every parcel that we offered,” he said. “There are a lot of things we could probably point to. The only change that we’ve done in selecting parcels and offering them up is we did this one via the online auction.”

The online option was an attempt to gain larger exposure and push up prices per acre, an attempt that appears to have worked. There were a number of unknown bidders in with the traditional players in Wyoming auctions, Crowder said.

“We are very impressed on the number,” he said. “It’s been a while since we had over 70 folks.”

The state officials have yet to make a decision on whether to transition to online bidding or do a mix of online and in-person auctions. That resolution will ultimately be made by the Wyoming Board of Land Commissioners, made of the state’s top five elected officials. The cost of running an online auction falls on the buyers, who pay a 2 percent fee on top of their bid.

The transition to online bidding went over well with operators like Steve Kirkwood, whose Casper-based oil and gas company was one of the largest bidders in terms of parcels, going after natural gas deals in Sweetwater and Carbon counties.

“I think the state ought to be happy. That’s a big chunk of money for them,” he said. “It’s going to drive prices up… anybody, anywhere can bid on it.”

The recent quarterly lease sale by the Bureau of Land Management was also larger than in recent years, to the delight of oil and gas operators across the state. The BLM is transitioning to an entirely online platform.

Kirkwood also credits the success of the sale to a renewed optimism and a changing political climate, one more favorable to the mining and drilling industries since the presidential election.

Spot prices for oil and gas remain low. The Henry Hub benchmark for natural gas has wavered below the $3 mark for most of the last five weeks, while West Texas Intermediate recently dipped below $50 a barrel, the lowest since November. Yet some prospectors are hoping to make it big in Wyoming when prices turn around.

The largest parcel sold went for more than $15,000 per acre, in Campbell County, bought by Navigation Powder River. Other large-figure bidders were Anschutz Exploration Corporation, a sister company to the developer of the Chokecherry and Sierra Madre Wind project, and Peak Powder River Acquisitions.

Contrarian players like Kirkwood gobbled up deals for natural gas in hopes that the market will return faster than some are expecting.

“We are excited about what we bought and keep pursuing some other opportunities in that area,” Kirkwood said. “We have gas production in the Washakie Basin quite a bit … We are just adding to our position.”

Interest in oil and gas from hedge fund managers and private equity companies shows a burgeoning faith in a market rebound, Kirkwood said.

“Things are going to turn around,” he said. “I can’t say tomorrow or this year, but I guarantee prices will go up and things will pick up. We hope.”