Crown land sales in British Columbia’s gas and oil basins dropped to zero last month inside a sign the crippling oil price environment has diminished the companies’ appetite to tap new lands for drilling.
“Nobody bought anything,” said Gregg Scott, president of Calgary-based Scott Land & Lease Ltd., who estimates the B.C. government has raised a mere $200,000 from sales so far this season compared to $2.8 million during the same period in 2015.
Last year, land sales within the wider Western Canadian Sedimentary Basin fell to some 23-year low, based on RBC Capital Markets, as oil erased 45 per cent of their value.
So-called “bonuses”, or up-front, lump-sum payments produced by companies to the government, fell to $351 million in 2015 from $1.07 billion in 2014 across Western Canada, RBC estimates.
Total acres acquired in Western Canada increased 24 per cent to 4.3 million acres in 2015, but the spike was primarily during the first few months of the season when companies were optimistic about a quick rebound in oil prices.
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Most of the find offer is in non-oilsands and companies must either drill and pay a royalty or lose the lease after 5 years. While most companies had chosen to drill wells even at a loss to preserve their lease this past year, many are now opting to allow the lease expire, Scott said in an interview.
“Land will continue to run out by the thousands and thousands of hectares before oil firms up to around US$50 a barrel, in my view. Then you’ll start to see a land rush,” Scott said.
For now, investors are at risk of the exit. Overall, Crown land prices in Western Canada fell 73 percent to $81 per acre in 2015, when compared with $308 per acre in 2014.
“2016 bonus dollars and acres leased are tracking substantially below 2015 levels,” RBC said.
Alberta’s land sales stood at $11 million by the end of February, when compared with $63 million in 2015.
Land will continue to run out by the hundreds of thousands of hectares before oil firms up to around US$50 a barrel, in my view.
Daniel Tchir, president of Fort Saskatchewan, Alta.-based Integrity Land Inc., said that junior and intermediate companies – traditionally major buyers of Crown lands in the past years – are absent because they can’t muster the capital and therefore are reluctant to invest amid the economical uncertainty.
“It’s a crapshoot,” Tchir said, noting that the combination of regulatory uncertainty and low prices are keeping investors on the sidelines.
Average value in Alberta’s plains basin had descended to $32.34 per acre within the first two months of this year, when compared with $99.04 in 2014. British Columbia’s selling prices had eroded to $32.85 this year, compared to $1,043 per acre in 2014.
Oil and gas companies are shunning Crown lands as there’s a slew of proven land assets for sales across Western Canada.
Some companies, such as Birchcliff Energy Ltd, Paramount Resources Ltd., Seven Generations Energy Ltd. and PrairieSky Royalty Ltd. bought up two-thirds of the 240,000 acres available over the past 2 yrs, RBC estimates.
yhussain@nationalpost.com
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