Bidding Interest Drops for Gulf of Mexico Leases

Topics: Asset/portfolio management
Source: Anadarko

Oil industry interest in obtaining new offshore acreage in the United States Gulf of Mexico (GOM) showed a significant decline in yesterday’s federal outer continental shelf lease sale, compared with the previous sale in March.  

US GOM region-wide Lease Sale 249, held by the Bureau of Ocean Energy Management in New Orleans yesterday, drew 99 bids from 27 participating companies, with high bids totalling USD 121 million.

The value of all bids received was USD 137 million for 90 blocks, a decline of 57% in bid value and 45% in block acreage from Central Lease Sale 247 on 22 March. That sale reflected the first increase in industry leasing activity in federal GOM waters in 5 years.

Deepwater Bids Dominate

In all, 14,177 blocks representing 75.94 million acres were offered yesterday, with the 90 blocks receiving bids amounting to 508,000 acres. More than 84% of the bids were for acreage in at least 2,625 ft of water with the highest concentration, 42 bids, for acreage in at least 5,249 ft of water.

The highest bid came from Total at USD 12.1 million for deepwater block Garden Banks 1003, which is adjacent to Cobalt’s appraised North Platte discovery that is actively being marketed. It was one of six high bids made by Total.

The sale’s second-highest bid was USD 10.8 million by ExxonMobil for deepwater block Mississippi Canyon 779, one of seven high bids made by the company.

Shell, Chevron Lead Bidding

Shell was the most active participant with 19 high bids, followed by Chevron with 15 and Anadarko with 10. Chevron ranked No. 1 in the total value of high bids (USD 27.9 million), followed by Shell (USD 25.1 million) and ExxonMobil (USD 20.3 million).

Commenting on the results of the lease round, Senior Research Analyst William Turner of Wood Mackenzie said, “Deepwater blocks won the day today, with 76 blocks receiving 98% of high-bid value at [USD] 118 million. The deepwater industry is emphasizing short-cycle, low-risk prospects above high-impact, wildcat drilling.

“Today,” he added, “we saw operators continue to focus on areas near existing infrastructure, with a majority of bids close to existing hubs or appraised developments. However, bids from Chevron, Shell, and Total near pre-FID [final-investment-decision] discoveries, Guadalupe and North Platte, were a vote of confidence in higher-risk, standalone developments with potential for higher rewards.”

Bidding Interest Drops for Gulf of Mexico Leases

Joel Parshall, JPT Features Editor

17 August 2017

Volume: 69 | Issue: 10