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US Oil, Gas Auction Generates Record $4 Billion Sale; Devon Energy Leads

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The US Department of the Interior generated a record $4 billion in a quarterly oil and gas lease sale in New Mexico and Texas, it said Wednesday, reflecting "strong industry demand" for drilling, in particular after a reduction in royalties for new projects.

The Bureau of Land Management leased 74 parcels totaling 33,530 acres, according to the statement. The quarterly result beat the last record set in 2018 with a sales total of $972 million, Reuters said.

Of the total area leased, Devon Energy (DVN) acquired 16,300 net undeveloped acres in the Delaware Basin in Lea and Eddy Countries, for about $2.6 billion, the company said. The resulting net acre cost is around $161,500.

Land services firm Federal Abstract came out as the second-biggest auction participant after Devon, with total bids of $1.1 billion, according to Reuters. Other participants included Buffalo Frontier, Veer Capital Partners, and Ridge Runner II Nominee.

Strong quarterly sales were largely attributed to a lower royalty rate for new onshore oil and gas production at 12.5%, down from the 16.67% rate established under the Inflation Reduction Act, according to DOI.

"The lower royalty rate reduces costs for energy producers operating on public lands and is expected to encourage additional investment, leasing and drilling activity across the West," DOI said.

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