The first bid—for a parcel of 901.2 net acres in Eddy County, N.M., about 30 miles southeast of Carlsbad Caverns in the Permian Basin—started unceremoniously at $2 per acre.

Just under nine minutes later, a second bid sucked the air—or whatever equivalent fills the Internet—out of the online auction room: $30,000 per acre.

UPDATE: Matador Revealed As Top Bidder In BLM New Mexico Auction

The parcel, on federal lands just across the border from Loving County, Texas, and near WPX Energy Inc.’s (NYSE: WPX) Stateline area in the Permian’s Delaware Basin, was part of 142 tracts in Eddy and Lea counties, N.M. offered by the Bureau of Land Management (BLM) on Sept. 5 and Sept. 6.

The action continued 17 minutes in, with the price more than doubled to $65,000 per acre. Latecomers moved in with offers of $67,000, $85,000 and $95,000 per acre before a final bid, by a single dollar, reached a record-breaking $95,001 per acre.

Top 10 Bidders By Total Value (Source: BLM; EnergyNet)

The BLM’s online auction, run with efficiency and precision by EnergyNet, easily tossed aside old records. Best bid for a parcel in New Mexico—$76.7 million—was easily crushed and now stands at $102.1 million.

BLM estimated that the parcels, covering about net acres 50,797 acres, could ultimately generate 342 million barrels of oil and 1.4 trillion cubic feet of natural gas.

U.S. Department of Interior Secretary Ryan Zinke, the cowboy-hat-wearing former U.S. Navy Seal, called the sale a “testament to the Trump Administration’s America First Energy Plan” and noted that proceeds broke several records, including total and the highest price paid per acre.

“Critics of the administration's American Energy Dominance policy often falsely claim there is little to no interest in federal oil and gas leases,” Zinke said in a new release. “Today they are eating their words and once again President Trump's policies are bearing fruit for the American people. The people of New Mexico will see about a half a billion dollars of this right back into their roads, schools and public services.”

The auction was a success despite top-level vacancies within the Department of Interior. President Donald Trump has lagged behind filling positions that require Senate approval in several departments.

In the Interior Department, Trump has left vacant nominees for its chief attorney, the director of the U.S. Fish and Wildlife Service and the director of the BLM itself. And for the past 19 months, the BLM’s $1.4 billion budget and 10,000 employees has been led by civil servants rather than a political appointee.

The New Mexico auction was the result of operators expressing interest and the government obliging. It gives a much-need PR win for the agency after Zinke canceled an auction in March due to protests. Other BLM online auctions this year have been lackluster, with average bids of $124 per acre, based on EnergyNet data.

Nonetheless, the spirit of an open auction freed E&Ps that have been ultra-cautious in the era of financial discipline. Top bids were garish, even for the Permian Basin: two adjoining parcels each sold for $95,001 per acre—a staggering $146.5 million for 1,541 net acres.

Sales for the first day, alone, totaled $386 million—more revenue than all BLM oil and gas leases sales in 2017, combined, at $358 million, Zinke said.

News of the big auction began to trickle out among guests during cocktails at Hart Energy’s A&D Strategies and Opportunities Conference in Dallas on Sept. 5. Seaport Global Securities analysts noted that initial reports of $82,000 per acre bid surpassed any valuation seen for Permian acreage in either the A&D or M&A markets.

Bids along the Texas-New Mexico border results were particularly encouraging for companies such as WPX, Matador Resources Co. (NYSE: MTDR) and Cimarex Energy Co. (NYSE: XEC), among others, Seaport analysts said in a Sept. 10 note.

The top 10 parcels generated $551.8 million in revenue for just 7,081.56 net acres.

Top bidder Federal Abstract Co., a Santa Fe, N.M.-based company that offers bidding services for buyers that want to maintain anonymity, acquired about 9,749 net acres for $387.4 million.

Marathon Oil Permian LLC, a subsidiary of Marathon Oil Corp. (NYSE: MRO), spent about $103.4 million on 1,799.2 net acres. Three of the tracts were tightly bundled near where the Pecos River begins to widen, as it curves south and empties into Texas. Marathon also purchased a parcel in Lea.

Seaport analysts said Marathon’s management emphasized that the acreage it purchased is near the Stateline area and the lease terms carry a 20-year agreement with a 12.5% royalty rate, which is about half of the typical 25% rate in the Permian.

“While we acknowledge the headline $57,500 per acre valuation comes in toward the higher end of recent Delaware M&A transactions, we can easily see this type of valuation being supported, especially given the low royalty rate associated with the leas,” Seaport analyst said.

Darren Barbee can be reached at