Data released by the U.S. Energy Information Administration (EIA) confirms that the Permian Basin’s oil wells have “led all U.S. oil basins in oil production per well since 2021.” According to an EIA report dated Nov. 15, “In the first eight months of 2023, initial production per new well averaged 847 barrels per day (b/d) per well, an increase of over 750 b/d since 2007.” … “Sustained well productivity improvements in the Permian have allowed oil production to grow despite the least number of rigs currently operating in the region since January 2022.”

It’s no wonder that U.S. oil and gas companies are attracted to expanding their operations in the Permian Basin, specifically in Lea County, where the potential of lucrative profits is statistically predictable. What this means is more jobs and more economic growth and activity for the area.

Northern Oil and Gas Acquires Assets in Lea and Eddy Counties 

One company adding a presence in southeastern New Mexico is Northern Oil and Gas (NOG). In a November 21 press release, Minnesota based NOG announced that it has entered into a “definitive agreement with a private party to acquire non-operated interests across ~3,000 net acres”, most of which are located in Lea and Eddy counties. The transaction was effective November 1, with NOG providing a $17.1 million deposit. The remainder will be paid at the transaction’s closing which is expected to take place during the first quarter of 2024.

The press release continues, “NOG owns existing interests in approximately 90% of the leasehold.” With expected production in 2024 to average 2,500 Boe per day with 67% oil, predictions suggest that from 2025 – 2030 average daily production will be 3,500 Boe. NOG estimates it will incur $25-$30 million in capital expenditures annually from 2024 – 2027.

Assets to be acquired by NOG as a result of the transaction are “13.0 net producing wells, 1.0 net well in process and an estimated 26.3 net undeveloped locations….”The undeveloped assets are considered to be of “extremely high quality.”

Scorpion Oil and Gas Enters Lea County

Privately owned Scorpion Oil and Gas (SOG) has purchased from an undisclosed seller almost 6,000 gross acres in Lea County. A SOG press release states, “The acquisition doubles the company’s oil and gas production and provides an attractive platform for future investments across the [Permian] basin.” Included in the acquired assets are “vertical and horizontal wells dating back to the 1950’s with a shallow decline….” The press release continues, “Production of about 400 boe/d (85% oil) is spread across acreage that is largely held by production with nearly 100% working interest. Proved reserves are 1.0 MMboe.”

SOG’s focus is on acquiring, developing and exploring “crude oil and natural gas properties” in southeastern New Mexico and West Texas, as well as on the Gulf Coast.

Further Expansion Expected in 2024

The U.S. Bureau of Land Management (BLM) plans to auction a total of approximately 6,180 acres of public land for oil and gas exploration in June of 2024. Of these acres over 3,000 in 10 parcels are located in Eddy County, with another 1,137 acres on seven parcels located in Lea County. Two parcels consisting of 359 acres are in Chaves County. Land in Kansas, over 1500 acres, is also proposed in the sale. The BLM is accepting public comments about the proposed sale now through Dec. 20.

Adrian Hedden states in a recent Carlsbad Current Argus article, “After the leases are sold via the auction, the winning bidder will have exclusive rights to develop the land and extract oil and natural gas for up to 10 years or as long as fossil fuels are produced.”

Go to eplanning.blm.gov find a draft list of the parcels proposed for sale.

Potential lease purchasers are reminded that the BLM has adopted new stipulations for oil and gas lease sales that comply with the Inflation Reduction Act (IRA) of 2022. These stipulations apply to the proposed June 2024 sale.

• The royalty rate leaseholders pay to the federal government has been raised from approximately 12.5% to 16.67%.

• Rental rates have been raised to $3 per acre for years one and two, $5 an acre for years three through eight and $15 an acre thereafter.

• The adoption of the IRA ended “noncompetitive leasing”. Companies are no longer permitted to nominate parcels and then bid on them.