University Lands sale hits new high

MIDLAND Over and over again, prices for oil and gas leases scrolled down the video screen in the Crystal Ballroom at the Hilton Midland Plaza. And over and over again, the prices were for millions of dollars.

“I was standing there watching, and I’d see, sometimes, six or seven in a row that were over a million dollars,” said Steve Hartmann, executive director of University Lands, which held its 118th oil and gas lease sale Wednesday.

In all, there were more than 100 tracts of land that sold for more than $1 million, Hartmann said. That helped lead to a record sale of $206,528,889.51, nearly quadrupling the previous record sale of $52 million set in 1980.

“I knew it would be a good sale,” Hartmann said. “I certainly didn’t think it would be this good.”

A total of 191,253.8 acres out of the 260,800 available in 15 West Texas counties sold during the sale. Though the number of acres made available was more than twice the number put up for lease at University Lands’ most recent sale in April, the average bonus of $1,079.89 per acre was also a record.

University Lands, which manages more than 1.5 million acres of oil, gas, minerals and surface interests in the Permian Basin, benefits the Permanent University Fund, a revenue stream for the University of Texas and Texas A&M University systems.

UT Regent Printice L. Gary, a member of the Board for Lease of University Lands, said he was thankful to Hartmann’s staff for putting together such a large sale.

“It’s a great day in Texas for both these institutions,” Gary said. “You hope it will continue in the future. I can’t predict the future, no one can. Let’s just take today as a great day.”

Wednesday’s sale was an improvement over the April sale, which raised $40,421,000, which had an average cost per acre of $664.93. As recently as April 2009, the sale brought in only $2.5 million, which was barely above the $2.08 million T. Verne Dwyer paid for a single tract on Wednesday.

For those bidding on the tracts, watching the bids flash on the video screen could be intense. Mike Mullins, a landman with Denver-based Berry Petroleum Co., said he was pleased his company was able to come away with all five tracts it bid on in Reagan County.

“Some of them were fairly high,” he said. “Everybody was concerned whether or not we were going to win the tracts.”

Mullins said the University Lands sales are a good place to find potential drilling sites and do it in a way where there will be no confusion over mineral rights or other issues.

“Available acreage is getting more scarce, depending on what you are looking for, in the Basin,” he said.

Taylor Mayne, president of the Permian Basin Petroleum Association, said the sale was encouraging for activity in the region.

“I think there’s quite a bit of interest,” he said. “I think it’s indicative of the general attitude everyone has in the Permian Basin right now. It kind of shows our colors.”

Hartmann said University Lands sales often set the tone for the oil and gas business in the area.

“It sure bodes well for the future,” he said. “Obviously, people have a lot of confidence in the Permian Basin.”