‘Clearinghouse Style’: The Action At The Auction

“Folks, it’s at $1 million and it’s absolutely going to sell,” Sturgis told the crowd.

Comstock’s package included gross production of 1,248 thousand cubic feet per day of gas from 21 wells and an average monthly cash flow of $7,629. Working interest ranged between 47% and 60% with 32% to 41% net revenue interest.

A couple of more bidders strained to take the lot before Sturgis dropped his gavel on the podium. It sold for $1.25 million to a bidder on the floor.

Opening Bid

Earlier as the live auction inched closer, the full room buzzed with excitement as buyers, sellers and interested industry members waited for the action to start.The auction included 45 lots of varying size and production types across Texas, Oklahoma, Colorado and other states. At Clearinghouse’s hybrid auctions, bidders can participate online or in-person.

Rising oil prices the past several weeks have clearly lifted industry optimism as well.

“I expect everybody has a little bit happier face given that oil is over $50 and not at $26,” said Jim Row, co-founder and managing director of OFSCap, which purchased Clearinghouse in March.

Clearinghouse’s auction started off with a lot of Arkansas and Oklahoma properties selling for $10,000, subject to seller’s confirmation.

Sturgis, a licensed auctioneer and president of Great Southwest Auction Co., has been a staple at Clearinghouse auctions for years. During the event, he and his team were positioned onstage and throughout the floor to call out bids as they came in from those present and online.

Preview

Hours before the first bids, Clearinghouse gave interested buyers the chance to meet with sellers, get a final feel for the properties they were considering and network during a pre-sale meet and greet.

“It’s just an opportunity [for buyers] to meet [sellers], look them in the eye, ask any questions, just get a comfort level,” said Denna Arias, vice president of business development at Clearinghouse.

Networking adds another dimension to Clearinghouse’s auctions, said Deborah Finlay, senior staff land associate with Newfield Exploration Co. (NYSE: NFX). Newfield had several packages for sale at the auction, including assets in Montana and Texas.

Through the auctions, Finlay said Newfield has been exposed to many buyers, several of them small operators, that later became buyers of properties on multiple occasions.

“We sold them what was advertised and they’ll come back to you over and over,” she said. “If you had not been here personally, those relationships probably wouldn’t have developed.”

Gary Wessels, senior staff landman at EP Energy Corp. (NYSE: EPE), said he’s been on both sides of Clearinghouse’s auction, as a buyer and seller, many times. At this auction, EP Energy was selling packages of noncore properties across several states, including Texas and Wyoming.

Even though Wessels said he’s seen things slow down since commodity prices dropped, he considers auctions beneficial because it puts a true market value on a property.

“When you have a property—out in Oklahoma or wherever—and you don’t have anything else around it, it’s hard to evaluate it because you don’t have anything else to compare it to,” Wessels said. “This really gets it out there to where other people can value it and bid on it.”

Mark Fischer, president of Mar-Dan Operating Co. based in Montgomery, Texas, said he’s looking to buy something a little closer to home.

Fischer is a small private investor that sees an opportunity from the downturn. Fischer said he started the operating company primarily to purchase marginal fixer-upper properties.

“We just started, so we’re trying to focus on Texas,” he said. “We want to stay in Texas because we know the legal, political, environmental climate and we know a fair number of the producing horizons. If we branch out too far, we’ll struggle.”

And Texas, as any state public official will tell you, is the place to do oil and gas business.

The Lone Star State’s strength is its flexibility in working with the industry, said David Porter, chairman of the Texas Railroad Commission, who gave opening remarks prior to the live auction. Texas is the largest producer of oil in the U.S.

“While our abundance of resources, capable workforce, sophisticated infrastructure and access to international markets have been factors in our success, our real success… is built also on the back of our regulatory framework which attracts investors from across the world,” he said.

Porter sees U.S. production strengthening once prices get closer to $60 a barrel, which many experts and analysts predict could happen early next year, he said.

“And I’m confident that if anyone can help the U.S. navigate this downturn and rebound quickly, it’s Texas producers because they are hardworking, innovative, dedicated and energetic,” he said.

Including the June 9 auction, Clearinghouse has closed around $60 million in asset sales in 2016. In 2015, the Houston-based firm closed about $240 million.

Emily Moser can be reached at emoser@hartenergy.com.