As oil prices plunge, Crown land sales fall to 23-year low: ‘Nobody bought anything’

Crown land sales in British Columbia’s oil and gas basins dropped to zero recently 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 to date this season compared to $2.8 million throughout the same period in 2015.

Last year, land sales in the wider Western Canadian Sedimentary Basin fell to some 23-year low, according to RBC Capital Markets, as oil erased 45 per cent of their value.

So-called “bonuses”, or up-front, lump-sum payments made by companies towards 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 shot up 24 percent to 4.3 million acres in 2015, but the spike was primarily during the first couple of months of the season when companies were optimistic about a quick rebound in oil prices.

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Most from 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 baffled to preserve their lease this past year, most are now opting to let the lease expire, Scott said in an interview.

“Land continues to run out by the hundreds of thousands of hectares before oil firms up to around US$50 a barrel, in my opinion. Then you will start to see a land rush,” Scott said.

For now, investors are heading for the exit. Overall, Crown land prices in Western Canada fell 73 per cent to $81 per acre in 2015, compared to $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 through the thousands and thousands of hectares before oil firms as much as around US$50 a barrel, in my view.

Daniel Tchir, president of Fort Saskatchewan, Alta.-based Integrity Land Inc., asserted junior and intermediate companies – traditionally major buyers of Crown lands in previous 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 a combination of regulatory uncertainty and affordable 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 the year, compared to $99.04 in 2014. British Columbia’s 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, for example Birchcliff Energy Ltd, Paramount Resources Ltd., Seven Generations Energy Ltd. and PrairieSky Royalty Ltd. bought up two-thirds of the 240,000 acres on offer over the past 2 yrs, RBC estimates.

yhussain@nationalpost.com

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