Oil Sands Land Becomes Alberta's Hot Real Estate as Oil Rebounds

(Bloomberg) -- An indication that crude’s recent rally has further to run can be found in the northern forests of Alberta, where companies are paying the most in eight years to lease land for oil sands development.

Auctions attracted the highest prices since 2007 in the first four months of the year even as Canadian heavy oil slid below $30 a barrel, from $87.23 in June, and producers from Cenovus Energy Inc. to Royal Dutch Shell Plc slashed spending and jobs.

The trend is a sign that companies see the decline to a six-year low in March as temporary. Western Canadian Select crude has bounced back, gaining about 70 percent since March, almost twice as much as U.S. oil futures, amid rising demand for heavy oil from American refiners. Producers are more efficent than before the downturn after companies including Canadian Natural Resources Ltd. cut costs as much as 20 percent.

“Right now it makes a great deal of sense to go in and acquire rights in the oil sands,” Trevor Newton, chairman of Strata Oil & Gas Inc., said in a phone interview. “Let’s get this now while we can. We are going to get them cheaper.”

The province holding most of Canada’s crude reserves, the world’s third largest, drew an average of C$476.14 per hectare ($978 per acre) in offerings of rights through April, the most seasonally since 2007, data on the province’s website show.

Biggest Buy

The biggest purchase was by LandSolutions LP, which buys rights on behalf of oil producers. The land company paid C$7,816 a hectare, government data show. The purchase was for carbonate reserves located under Shell’s Peace River operations, said Strata’s Newton, whose company bid unsuccessfully for the reserves.

The increase in lease prices is a bright spot for Alberta, where revenue from leases and permits fell to C$24.1 million in the fiscal year ended March 31 compared with C$25.1 million a year earlier.


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Copyright 2016 Bloomberg News.


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