ADVERTISEMENT

Bids, Dollars Rise in Third Regionwide US Gulf of Mexico Lease Sale

On 15 August, Hess won 16 blocks in bids totaling $36.2 million in US Gulf of Mexico Lease Sale 251. Earlier this year, the New York City-based independent celebrated the production startup of its operated Stampede development (pictured) in the gulf. Source: Hess.

The third regionwide US Gulf of Mexico lease sale drew more bids and more money than the first two, providing, for now, another reason for optimism in an offshore industry hungry for a resurgence.

Lease Sale 251 drew 171 bids on 141 blocks with high bids totaling $178.1 million, up 43% from the last regionwide auction in March, the US Bureau of Ocean Energy Management (BOEM) announced from New Orleans on 15 August. Twenty-nine companies submitted bids, including the usual group of participants consisting of majors and big independents from past lease sales.

Offshore operators showed “their continued confidence in the region,” said William Turner, senior research analyst at Wood Mackenzie, in comments following the event. The improved results came in spite of less acreage being made available compared with the March auction—the largest ever—and the government’s unwillingness to budge on recommended cuts to offshore royalties.

ExxonMobil headlined the event by submitting the most high bids, 25, and the largest sum of high bids, $40.6 million. Two of those bids were for De Soto Canyon 939, $8.5 million, and De Soto Canyon 983, $7.5 million.

Several blocks won by ExxonMobil toward the eastern gulf were relinquished from the 2007 and 2008 lease sales, Wood Mackenzie noted. Those blocks were previously held by Shell, whose bidding declined this round compared with recent auctions.

Hess ranked second in sum of high bids at $36.2 million, which included the single highest bid for a block in the auction: $25.9 million for Mississippi Canyon 338. The independent totaled 16 high bids.

The high bid from Hess was the round’s “biggest surprise,” said Turner. While the block lies “in the heart of the Mississippi Canyon near BP’s Na Kika offshore platform,” it’s also near Noble Energy’s Silvergate prospect that turned up dry in 2016.

It took just five high bids for Chevron’s sum to reach $18.7 million, the majority of which came from the $11.1 million the company pledged for Mississippi Canyon 743.

BP tallied the second-most high bids at 19, totaling $12.6 million. Equinor counted 16 high bids amounting to $13.2 million. Five high bids from Anadarko totaled $12.5 million, including Green Canyon 437, which received the most interest of the available blocks with four bids. 

Turner said the results, particularly from ExxonMobil and Equinor, showed “an increased appetite for risk with bids on remote blocks,” supported by higher oil prices and a competitive return on investment in the Gulf due to improved efficiencies.

As with other Gulf lease sales over the past few years, deepwater blocks were most coveted. Blocks in 1600 m of water or more earned 55 bids and $111.6 million in high bids. Those in 800–1599 m of water took 43 bids and $48.5 million in high bids.

Better Operating Environment

The last regionwide auction, Lease Sale 250, drew 159 bids with high bids totaling $124 million. The first, in August 2017, garnered 99 bids and $121 million in high bids.

“While not a barn burner, Lease Sale 251 tops the previous Gulf sale” given the increased participation, increased competition, and high bid amounts, Randall Luthi, president of the National Ocean Industries Association, said in a statement. “In addition, bidding activity demonstrates both continued interest in deepwater tracts and renewed interest in shallow-water tracts.”

Luthi believes the US gulf operating environment is showing “tangible signs of improvement” and “is poised to shift into high gear,” as “oil prices are higher, revisions to overly burdensome regulations are in the works, rig rates and supply chain prices are more competitive, and companies have improved the efficiency of their operations. The results of today’s sale reaffirm the paradoxical state of an offshore energy industry in slow recovery mode: The future is bright, but shifting out of reverse takes time.”

The three regionwide auctions are part of the 2017–2022 Outer Continental Shelf Oil and Gas Leasing Program under which 10 lease sales are scheduled. Two gulf sales are slated to be held each year and include all available blocks in the combined western, central, and eastern planning areas.

However, US Sec. of the Interior Ryan Zinke in January announced a draft proposed program for a new National OCS Program for 2019–2024. BOEM will develop and publish a proposed program for public comment later this year, followed by the proposed final program expected in 2019.

Top 10 Companies Based on Sum of High Bids 

Company

Total High Bids

Sum of High Bids

ExxonMobil

25

$40,555,000

Hess

16

$36,178,321

Chevron

5

$18,705,332

Equinor

16

$13,224,672

BP

19

$12,571,230

Anadarko

5

$12,481,890

Shell

3

$6,305,964

Total

4

$5,800,786

Deep Gulf Energy

7

$5,553,710

Walter Oil & Gas

2

$5,397,050

Bids, Dollars Rise in Third Regionwide US Gulf of Mexico Lease Sale

Matt Zborowski, Technology Writer

15 August 2018


STAY CONNECTED

Don't miss out on the latest technology delivered to your email weekly.  Sign up for the JPT newsletter.  If you are not logged in, you will receive a confirmation email that you will need to click on to confirm you want to receive the newsletter.

 

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT