Lease sale nets $5.4M, Alaska Peninsula draws first bids since 2007


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Editor's note: This story has been updated to reflect the lease sale total of $5.4 million compared to the original reporting of $5.2 million, and that 35 of the 152 tracts for sale were sold. Hilcorpo also acquired 13 tracts rather than 11. Corrections noted below in bold.

Bidding was modest at the state’s annual Cook Inlet and Alaska Peninsula “areawide” lease sales May 7, with bids coming from independent companies and most of those in Cook Inlet from companies already established there.


A surprise, however, is that there were three bids on tracts near Port Moller on the Alaska Peninsula in southwest Alaska. The state Division of Oil and Gas routinely offers leases on state-owned lands on the peninsula when it makes the Cook Inlet acreage available.


Until this year, however, there have been no bids for Alaska Peninsula leases since 2007. Shell acquired several leases in 2007 but subsequently dropped them. This year two small independents, Auxullium Alaska Inc. and Novus Terra Ltd. offered bids on three parcels.


All three leases were near shore and southwest of Port Moller.


In the Cook Inlet sale, 152 state-owned oil and gas tracts were offered and 35 were sold for about $5.4 million in high bids, state Oil and Gas Division Director Bill Barron said. All bids were from independent companies. No major companies submitted bids.


Bids for 10,280 acres of leases sold on the Alaska Peninsula totaled $51,400, Barron said. Cook Inlet leases sold totaled 108,543 acres.


“Eight bidders participated in the Cook Inlet sale and the high bids of the sale, of $153 per acre came from Woodstone Resources for two tracts,” Barron said.


The state had set a minimum bid of $25 per acre.


Hilcorp Energy acquired 13 tracts in the sale with bids ranging from $30 to $40 per acre, while Apache Alaska Corp. won seven tracts with bids that ranged mostly from $26 to $50 per acre but with an $86-per-acre bid on one tract.


Hilcorp is the major oil and gas producer in the Inlet, having acquired Chevron Corp. and Marathon Oil Co. properties in 2012 and 2013. Apache is engaged in a multi-year exploration program.


Other companies participating included Cook Inlet Energy, a small producer on Cook Inlet’s west side, which acquired four tracts near its existing producing areas; NordAq Energy, which acquired four offshore tracts in North Cook Inlet, and Woodstone Resources, acquiring two offshore tracts also in North Cook Inlet.


On most tracts there were single bids but a handful attracted two bidders and one brought three. Apache beat out Hilcorp in bids for two leases, with Hilcorp’s bids of $51.33 and $53.22 per acre topped by Apache’s offer of $86.33 per acre on one lease and $86.53 per acre on the second.


All of the leases were for 10-year terms with royalty rates set at 12.5 percent. The annual rents range from $1 per acre to $3 per acre in the peninsula sale to $10 per acre to $250 per acre on the Cook Inlet tracts, Barron said.


Cook Inlet has seen a redevelopment of industry activity and new production in recent years, and the state’s annual areawide sale, in which all unleased state land in the region is offered, is usually seen as a barometer of activity.


The results in this sale, while modest in terms of revenue to the state, demonstrate continued interest by the larger independents, such as Hilcorp and Apache, and the appearance of new firms interested in the Inlet, such as Woodstone Resources.

 

Tim Bradner can be reached at tim.bradner@alaskajournal.com.
 

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