20 Aug 2024 | 20:38 UTC

August oil, gas lease sale of New Mexico State Land Office attracts over $628,000

Highlights

Federal Abstract Co. wins 7 of 8 tracts offered

Two biggest bids at $169,000 each

Getting your Trinity Audio player ready...

A single bidder cleaned up during the most recent New Mexico state oil and gas lease sale Aug. 20, winning seven of eight tracts offered, according to the state's Land Office records, as the agency continued to place minimal numbers of parcels up for auction while awaiting a controversial legislative decision.

Federal Abstract, which was the sole winner in the monthly auction, will pay nearly $628,000 for the seven parcels on which it bid in Lea and Chaves counties. An eighth tract in adjacent Eddy County received no bids, New Mexico State Land Office records show.

Two of the highest bids of the sale were for tracts in Lea County, where Federal Abstract offered nearly $169,000 for each. Lea and Eddy counties are held to be the state's most productive areas, with both in its far southeast region. The two lowest bids were $30,000 apiece. Tract sizes ranged from 40 acres to 320 acres each.

Lea and Eddy counties

Lea and Eddy Counties accounted for most of New Mexico's current 2 million b/d of oil production in May 2024, according to the latest US Energy Information Administration figures -- an output milestone achieved earlier in 2024. Also in May, New Mexico had 9.56 Bcf/d of gas production.

The two counties form part of the greater Permian Basin, which in May had about 6.1 million b/d of oil output and about 25 Bcf/d of natural gas output, the EIA said.

New Mexico's oil production remained under 500,000 b/d for decades of its long history of petroleum production. However, once the shale revolution came into play in regions of the state near Texas in about 2016-17, production grew rapidly. The state's oil output hit 1 million in 2019 and has grown every year since except in 2020 because of the coronavirus pandemic.

Federal Abstract, which frequently appears at New Mexico's State Land Office monthly lease sales, offers its services of record-keeping what it calls the historical "chain of title and interest holders" on leases from inception to the present, for federal, state and indigenous lands.

New Mexico state oil, gas lease sale results -- August 2024
Tract Bid amount ($ dollars) Tract winner $ dollars/acre Acres
001 104,000 Federal Abstract Company 650 160
002 30,000 Federal Abstract Company 750 40
003 30,000 Federal Abstract Company 750 40
004 None received N/A N/A
005 168,960 Federal Abstract Company 528 320
006 168,960 Federal Abstract Company 528 320
007 42,240 Federal Abstract Company 528 80
008 84,480 Federal Abstract Company 528 160
TOTAL 628,640
Source: New Mexico State Land Office

Low number of parcels post-February

The number of parcels offered in the last several months of New Mexico state lease auctions has decreased mostly due a stall in the New Mexico Legislature in approving a higher oil and gas royalty from upstream players of 25%, higher than the current 20%. That stall prompted a subsequent decision by the State Land Office to wait until the Legislature raises the royalty rate on leased parcels.

The August 2024 state lease sale was higher than the July 2024 sale, which received $564,000 across seven parcels, and the June 2024 sale, which took in $522,600 on two parcels. Sales of the last few months are a far cry from high-bid totals in the seven- and eight figures that were seen before March 2024, when State Land Office Commissioner Stephanie Garcia Richard, who favors the 25% royalty, decided to withhold some of its best acreage until the Legislature raises the royalty rate on leased parcels.

Garcia Richard has argued that placing New Mexico's best E&P best acreage out for lease at the current lower royalty rate deprives the state-sponsored investment trust fund -- where a portion of royalties are deposited to use in public schools, universities and hospitals -- of considerably more money.

However, entities representing upstream petroleum producers claim that taking all New Mexico taxes into account, the total amount paid to the state by oil and gas companies approaches the 25% royalty rate of neighbor state Texas, in which most of the Permian Basin is located.

In New Mexico's March 2024 state lease sale, winning bids totaled just $95,000 across five parcels, while the April sale did better, taking in $2.1 million on nine tracts. The February 2024 sale received $13.3 million for 19 parcels, while the January 2024 sale took in $21.4 million on 15 tracts.

Register for free to continue reading

Gain access to exclusive research, events and more

Already have an account?Log in here