Sealed bids to lease Texas GLO land will be opened today. I looked at last year's results and a few stood out that you all might be interested in... "R. S. Johnson 68" leased at $30,107 per acre. "T&P Ry Co 6" leased at $30,123 per acre. "T&P Ry Co 36" leased at $16,500. That's right, LEASED, not sold!! Those were the exact descriptions shown on the tabulation - I'm not sure if Township, Block or Section is being described by the number? Anyone know of any special characteristics of these areas to warrant such high rates, or have prices really just risen that much in some areas of Reeves County? I assume the figures are per net mineral acres, but the table just says "acres."
I don't know the answer to your questions. But I noticed that some of the acreage available is limited to the lower depths - not seen that before. I assume it means the acreage is already leased and maybe even producing at higher depths. Very interesting. Thanks for alerting us to the auction.
I've been to dozens of auctions in my long career and won many leases using my personal money. The basic thought process is always the same. The ultimate users of the leases; the producers, know the amount of oil in the ground from detailed geologic studies and the engineered methods and costs of getting the oil out of the ground at a designed profit. They give their bidders a limit to bid on each parcel that recognizes the opportunity cost of taking that parcel. Auctions are one of the ways producers reserve the inventory they need to perpetuate the companies. It is strictly business using science. There is no emotion or pride of ownership involved. The relative prices you see at auctions reflect the producers understanding of the oil in the ground that can be removed at a profit and they will pay as little as possible but won't exceed a predesigned limit.
In the Permian Basin today, there is another dynamic driver to auction prices and that is the fund manager or who wants a "piece of the huge pie" for his investors and to collect his management fee. These players often add a premium to the auction process much like day traders do in the stock market.
Auctions will bring the best of the lowest prices bidders will pay and have nothing to do with the science of oil reserves. I'm always amazed at the questions on MRF by owners who want to know the "going price" for sales or lease bonus. If they don't know the geologic and production potential of their minerals through science, the can only expect to get the average of the lowest prices in the area. Fair Market Value will always be based on the interpretation of the physical characteristics of an oil deposit available at the time.
Gary, very informative reply from someone in the know - thank you. But your last paragraph leads to a question for those of us who have asked for the "going price" for lease bonuses in an area. (I would be one of the guilty parties.) Are you suggesting we should have seismic studies done on our properties to determine the potential? How much do they cost? Are there other ways to determine production potential and thus lease-bonus value? My family still has a property to lease in Reeves and so this is very interesting to us. TIA.
Tom, the GLO sale you asked about back in January, 2017 is too far back to pull up location details.
For the sale that closed today if you want to see bid locations, this link is the website of a company called EnergyNet that handles the bidding for GLO. https://www.energynet.com/govt_listing.pl
Click Texas GLO sale and it should open to today's results. Each bid parcel has a place you can click to view the location on a map that also shows the legal description.
There were only 10 Reeves parcels in todays sale and 3 of them received no bids. The winning bids on the other 7 ranged from $3,505/ac (minimum allowed in Reeves is $3,500/ac) up to a high of $18,760/Ac. for one 80 acre tract in Sec. 30, Blk 5 H&GN RyCo..
GLO has two bid sales a year. To see the results for the one last August, at the top of that first EnergyNet page click "Sales Results", then "Government Sales Results" and below YTD Results click "View Previous Year Results". You can then scroll down to the site for Texas GLO August 1, 2017 and see the same details as in today's sale. If you go further down you'll see the place the January, 2017 GLO sale is listed but the link no longer works.
The tracts bid on in these sales are nominated, or proposed, by companies interested in leasing them. It probably isn't the answer in all case, but companies holding lots of leases in an area, that they may have acquired over time at much lower bonus rates, can afford to pay a premium for acreage that fits their overall position. When two or more companies are in that same position regarding a certain parcel the competition and second guessing can drive up the bids.