The US Department of the Interior collected more than $4 billion from its most recent oil and gas lease sale in the Permian Basin spanning New Mexico and Texas. The proceeds, including bonus bids and rental payments, are shared between the federal government and the two states.
Overseen by the US Bureau of Land Management, the quarterly lease sale covered 74 parcels totaling more than 33,500 acres of federal land. The sale follows new tax legislation that reduced the federal onshore royalty rate from 16.67% to 12.5%.
In a release, the Interior Department said it expects the lower royalty rate to reduce producer costs while encouraging additional investment and development activity. Federal oil and gas leases are issued for 10-year terms and remain in effect as long as hydrocarbons are produced in paying quantities.
“America is sitting on some of the richest energy resources in the world, and President Donald J. Trump is committed to putting those resources to work for the American people,” said Secretary of the Interior Doug Burgum. “This over $4-billion lease sale is another sign that President Trump’s American energy dominance agenda is delivering results. By cutting costs and removing barriers to development, we are unleashing American energy, strengthening national security, creating jobs and generating significant revenue for taxpayers and local communities.”
The top three bidders accounted for a combined $3.9 billion, representing 98% of total revenue and 83% of the parcels awarded.
The top bidder was Houston-based Devon Energy, which acquired nearly 16,300 acres for $2.6 billion, or about $161,500 per acre and $6.5 million per drilling section. The company said the acquisitions provide contiguous acreage positions that support longer lateral development and lower capital intensity through co-development and multiwell pad designs.
“Each tract was evaluated on rock quality, midstream connectivity, strategic fit, and per-share value accretion for our owners. The favorable federal lease terms, including the lower royalty burden, multipay potential and the ability to develop with longer laterals on multiwell pads, are immediately accretive to our top-tier inventory,” Clay Gaspar, CEO of Devon, said in a statement.
Dallas-based Matador Resources also acquired more than 5,150 acres for $1.1 billion in the Delaware Basin of southeast New Mexico. Similar to Devon, Matador said the additional acreage will support development of 3-mile laterals or longer.
Buffalo Frontier LLC secured an additional 6,214 acres in the sale for a total of $144.1 million.