The Texas General Land Office (GLO) holds four oil and gas lease sales each year in January, April, July and October, typically on the first Thursday or third Tuesday.
The July lease sale this year was held last Wednesday, the 16th.
During the sealed bid sale, the Land Office allows an oil and gas company to make a cash offer for the right to explore and produce hydrocarbons on a particular piece of Permanent School Fund property. The company offering the highest up-front payment, or bonus, wins the lease.
The Land Office receives a percentage of any production from the lease, called a royalty. To view the tracts that were available for lease this month, click here.
Texas General Land Office Track Categories
Nominated tracks fall into five categories:
- Surveyed School Land – Unsold upland tracks and tracks sold by the state with a mineral reservation.
- Rivers, creeks, lakes and bayous (not tidally influenced).
- Bays, lakes, islands and bayous (tidally influenced).
- Gulf of Mexico.
- Agency Lands – State parks, prison land and other lands owned by state agencies whose oil and gas leasing is managed by the GLO.
Given the wealth of oil and gas in the State of Texas and the sheer breadth of land managed by the GLO, these lease sales can be a lucrative way for operators of all sizes to pick up prime acreage.
Mastering the Drillinginfo Workflow
As a service to the GLO and for the convenience of our subscribers, Drillinginfo keeps all GLO-owned coastal tracks posted in our land grid. You can also locate non-coastal tracks using the land descriptions posted in each bid notice. Having said that, let’s take a look at these one at a time.
Locating Coastal Tracks
First, open the bid notice and find the Gulf of Mexico page.
Next, decide which acreage you would like to bid on. For the purposes of this exercise, we’ll take a look at MGL. NO. 92.
Now, login to Drillinginfo and click the “Search” tab at the top of the page. Select “Texas” from the drop down menu, scroll down and click “Production.” Since the bid notice tells us the MGL. NO. is located in the High Island Area, click the “Open larger list” button, choose all of the “High IS” areas and click “Finish.”
This brings up a map of Texas. Notice the wells in our area of interest down near the Gulf Coast. Click and drag to create a red box around the area and zoom in.
Now zoom again.
A final zoom reveals MGL. NO. 92., and something else of interest. Directly to the north, we can see a well that was on State Tract 87-S flowed for 14 years and produced almost 800,000 barrels of oil.
This is no guarantee you’ll drill a well just like it, but it does tell you other operators have had success in the vicinity of your target. Knowing that, you can place your bid with a heck of a lot more confidence than if it was surrounded by dry holes.
Locating Non-Coastal Tracts
The workflow with non-coastal tracts is a bit easier in that you can use the land description to narrow your search, which means less zooming and guess work. For example, look at MGL. NO. 4 in Reeves County on page 11 of the bids notice. The minimum bid is $150,000 for 100 acres vs. $19,600 for for 98 acres in Howard County. Let’s dig in and find out what’s going on with that Reeves County acreage.
Click the “Search” tab at the top of the page. Select “Texas” from the drop down menu, then scroll down and click “Production.” Select “Reeves” from the County menu, enter Block number 57 and click “Finish.”
Once again, you can see there is a nearby well that is flowing pretty good. We’ve also turned on the Pipelines layer and can see there is plenty of infrastructure in the area to bring your production to market.
From here, you’ve got a number of choices. You could run a Permits search to see what other operators are currently taking a position in the area. You might also run a completions search to discover a few best practices of what works and doesn’t in the area. Or, you can dive a bit deeper into analyzing the production of individual wells and extrapolate out a few different decline scenarios using Drillinginfo’s Production Charting application.
After you’ve done your due diligence, it’s time to place your bid. The GLO has already posted a tabulation of the bids from last week and BHP Billiton had the most diverse approach, with 29 bids for a total of $633,281.25. However, Roger A Soape placed by far the largest single bid at $2,044,910.63 for an undisclosed amount of acreage in the Ellis I Unit.
As with many tracks acquired in the GLO lease sales, brokers such as Mr. Soape place the bids and therefore conceal the true buyer. With the addition of County Scans to the Drillinginfo suite of products, you can now search assignments to reveal the true owner, provided the area is covered by County Scans.
But, this isn’t all about deep pockets. In looking through the list of bidders, you will see operators of all sizes. Whether you’re a small independent or one of the big guys, there’s plenty of room for you at the GLO.
So, study up and get ready to place your bids. October will be here before you know it!
What do you think? Have you ever participated in the Texas General Land Office lease sale? If so, what was your experience? Please, leave a comment below.
Latest posts by Bob Black (see all)
- Redeterminations, Hedges and Oil & Gas Q415 Outlook - October 1, 2015
- Natural Gas Exports to Mexico on the Fast Track - August 11, 2015
- Gulf Coast LNG is Ready for the World - July 14, 2015