EnergyNet.com

Online Auctions Offer Deal-making Access 365 Days a Year

Industry warms to new strategy for buying and selling oil and gas properties

By Jo Ann Davy, Editor

The folks at online oil and gas property auction service EnergyNet Inc. have been looking forward to NAPE so they can thank all their buyers and sellers in person. Having sold 3,179 properties online in 2007, they will indeed be busy during the show, Feb. 7-8, 2008, in Houston. EnergyNet facilitates the sale of producing working interests (operated and non-operated), overrides, royalties, mineral interests and non-producing leasehold. 

Auctions go on 365 days a year. “In 2007, we sold our first negotiated property, which consisted of leases and wells in the Barnett shale,” said William W. Britain, president and chief executive officer, EnergyNet Inc. “December 2007 was the largest month in EnergyNet’s history at US$18.44 million, the largest single property sale at $8.75 million and the largest single day of sales with three properties selling on December 27 for $11.8 million.”

Britain adds that the largest transaction for 2007 involved two royalty properties in Kern County, California, for a California seller that brought $9.75 million.

“Our sales success ratio is 90.1%,” Britain said. “The reason we substantially exceed the industry average in this area is that we carefully and thoroughly address seller expectations prior to the sale. We do not want buyers looking at properties that are not realistically for sale.”

There are several advantages to selling those properties via online auction versus a traditional sale, Britain said. “An auction is over when it’s over. There is no purchase and sale agreement or negotiation following the sale to change the bid price established at the close of the auction. This means EnergyNet can list a property and have funds to the seller within 30 to 45 days rather than the typical negotiated sale time frame of 2 to 5 months.”

Conducting an auction online versus live also has many benefits, Britain said. “A significant one is that all buyers are on a level playing field, which means they all have the same due diligence data that is presented fully in our online data rooms. They don’t have to search through files after they have had to travel to a destination where a live sale is being held.”

Britain explained that the online auction allows many more buyers to participate in the process although they may have never heard of or attended a live oil and gas property auction. “Because our auctions are held in a continuous format and occur every week of the year, buyers and sellers can utilize the process at their convenience,” he said.

EnergyNet lists many large companies as clients, including Chevron, Shell, Apache, Dominion and Kerr-McGee. “We have been successful in serving the trust departments of Bank of America, Wells Fargo and Citibank,” Britain said. “We also highly value the over 1,500 smaller clients who have allowed us to market their properties.”

Britain said that acceptance of the online auction by the traditional oil and gas work force did not come easily. “After all, there were about seven internet companies that started out in 1999 and 2000 and they are all gone,’ he said. “However, as younger folks who grew up using computers in their everyday activities move into management positions, the bias has virtually disappeared. It has also helped that we have marketed almost half a billion dollars in oil and gas properties.”

In 2008 EnergyNet plans to continue providing customer-focused service. Britain invites NAPE attendees to stop by the company’s booth to give feedback and comments. The booth will highlight a 17,600-acre mineral and surface property in West Baton Rouge and Iberville in EnergyNet’s negotiated sale area, along with the 224 properties in 15 states that are among the company’s current listings. “We thoroughly enjoy the networking opportunities that NAPE provides,” Britain said, wishing good luck to clients who will bid at the company’s auctions that will take place during NAPE.

“We understand very well that we are in the service business and we are only as good as our last sale,” Britain added. “We will never stop striving to deliver more than is expected.”  

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