Lease sale numbers improve

By: 
Nicole Pollack with the Casper Star-Tribune, from the Wyoming News Exchange

CASPER —Wyoming just wrapped up its most lucrative state oil and gas lease sale in three years. The first of three annual auctions generated $2,650,138, the biggest profit since before the pandemic, according to the Wyoming Office of State Lands and Investments. 

That’s more than 10 times higher than the state brought in last March ($258,981) and nearly double this time two years ago ($1,422,293). 

But it’s just over half of the $4,535,748 earned in March 2019. 

Most of the revenue will go toward K-12 education, with the remainder distributed among recipients like the state library, agricultural college, state penitentiary and miners’ hospital, according to Holly Dyer, assistant director of the Trust Land Management Division at the Office of State Lands and Investments. 

“While the results from our latest auction are still preliminary, we do feel it was a success,” Dyer wrote in an email to the Star-Tribune. 

Producers bid on 63 of the 196 available parcels. Those bids span 25,451 acres of state lands — 36% of the acreage offered for sale. 

“We’re hopeful that increased auction participation will lead to continued development of the (state’s) oil and gas resources and continued revenue stabilization,” Dyer said. 

Oil and gas lease sales often serve as indicators of operators’ long-term expectations. 

It’s possible to start producing on a new lease in as little as six months, but in Wyoming, operators can — and often do — hold onto non-producing state leases for up to five years. The drilling rig count offers a nearer-term picture of industry activity. Because oil wells’ output drops off over time, companies must drill new wells to keep production steady; aside from one week in the early months of the pandemic, Wyoming’s rig count has always been above zero, though it remained in the single digits for a year. 

Since August, the rig count has hovered between 14 and 18, according to Baker Hughes — roughly half of where it stood before 2020. 

High oil prices are boosting rig counts in other states, including Texas, typically the fastest state to respond to favorable market prices. 

As usual, production in Wyoming has been slower to respond. The state’s oil and gas industry is worried about how uncertainty regarding the future of drilling on Wyoming’s federal leases will affect producers’ willingness to ramp up. 

Oil and gas companies already hold millions of acres of non-producing federal leases in Wyoming, but the state hasn’t seen a federal oil and gas lease sale in more than a year. 

“Strong interest in state leases reinforces that companies are interested in Wyoming’s natural resources,” Ryan McConnaughey, communications director for the Petroleum Association of Wyoming, said via email, “and reminds us just how much is at stake as the Biden Administration continues its refusal to uphold the law and conduct quarterly lease sales on federal lands.” 

A range of factors drive U.S. production decisions, including the price of oil, which is driven primarily by international actors, and individual companies’ willingness to take on the risks embedded in today’s volatile market. 

In Wyoming, where the rig count inched up last week from 14 to 15, it’s too soon to know whether drilling on state leases will prove any more appealing than on federal ones.

 

This story was posted on March 15, 2022

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