Record land sales underscore new interest in oil plays

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Energy companies spent an eye-popping $842-million on Wednesday to snap up oil and gas land in Alberta in a sale that shatters the previous Canadian record.

The sale is further proof of the massive attention industry is paying to a series of lucrative new oil plays, where advances in technology are bringing oil to surface from areas once thought tapped-out.

Alberta's $842-million sale beats the previous B.C. record of $610-million in July, 2008. It also exceeds other Alberta high-water marks, $559-million for oil sands in February, 2006, and $475-million for oil and gas land in December, 2005. The huge sale pushes Alberta's year-to-date tally to $1.74-billion, which almost surpasses the annual oil and gas record of $1.83-billion set through all of 2005.

"I almost couldn't believe the number when I saw it. I thought there must be a mistake," Alberta Energy Minister Ron Liepert said. "I'm told it's not. It's for real."

The sale set a number of records, including the $106.5-million paid for a single parcel - the most ever. There were so many other major buys that "we had six parcels of land make the top 10 all-time sales," Alberta Energy spokesman Jay O'Neill said.

Behind the huge spending is a thirst for oil that has been elevated by triple-digit prices and a flight from natural gas, where prices are so low it's hard to drill profitably.

"Those levels are unprecedented, and fantastic, as far as we're concerned," said said Winston E. Gaskin, president of Standard Land Co. Inc., a firm that works with companies to make bids.

"What's driving it all is obviously oil is more prolific across the province than once thought."

Sustained oil prices have also brought capital coursing back into the oil patch from investors who have recovered enough from the recession and are now regaining their appetite for resources.

"There's still quite a bit of money coming into the industry as it recovers and chases after $100 oil," said Brad Turner, an industry consultant. "And every time someone raises money, they have to spend it on something, and they have to establish a land position to get going."

As is customary, most of the largest land bidders used agents like Standard to disguise their presence, hiding their purchasers from competitors who are often eager to see who is buying where.

The bulk of the money spent is in established oil and gas country, with many wells poked in the land over decades - which means infrastructure from roads to pipelines is already in place and companies will already have had access to reams of technical data such as old well logs and extensive rock samples.

Indeed, the $106.5-million bid was for land north-east of the town of Rocky Mountain House, in a play known as the Cardium, which is a sort of second life for the Pembina, one of Alberta's oldest and most prolific oil fields which is being reinvigorated by new drilling techniques.

"And whatever they've got, they know what they're looking at," said Steven Paget, an analyst at FirstEnergy Capital. Mr. Paget, like others in the Calgary oil business, was taken aback by the $842-million number: "These are some giant totals," he said.

The figures are big enough that the Alberta government is already openly speculating on how the financial picture is improving for a province that has been mired in multi-billion-dollar deficits.

"It's difficult to predict from one year or another what our revenues are going to be when you have literally almost a $1-billion injection into the provincial purse in one fell swoop like we just had right now," Mr. Liepert said.

"It certainly looks a lot brighter than it did on budget day."