Report from New Orleans: big numbers on the table

— Asked for his impression shortly after Western Gulf of Mexico Lease Sale 204 in New Orleans this past week, Lars Herbst, acting Gulf regional director for the US Minerals Management Service, characterized it as "not a record sale, but ... a good sale." But his comment merits a second look, because the auction, which captured $290 million in total high bids across 282 blocks, actually did set some records.

The $290 million captured by Sale 204, held August 23, represented the second-largest total apparent high bids in nine years, lagging only last year's $341 million. Moreover, the sale was a standout for deep waters: nearly two-thirds of the total 282 blocks receiving bids were in water depths below 800 meters, according to records supplied by sale sponsor US Minerals Management Service. Those same tracts contributed 85% of total high bids. Moreover, much deeper waters of 1,600 meters or more represented just over a quarter of all leases bid on, but these captured more than half of all high bids. Sale 204 also holds the record for the largest dollar total of high bids in ultra-deep waters below 2,000 meters since 1998 -- $106 million. That compares to $12.5 million last year and $81 million in 2005. MMS has kept precise tallies for ultra-deep waters, which industry has just begun to plumb in the last three years. Before that, the agency included that segment with waters 1,600 meters deep and below. Even by that measurement, Sale 204 was no slouch. Judging by monies spent for all tracts in more than 1,600 meters of water, the auction still took in far higher amounts of deepwater money than its predecessors -- nearly $152 million, versus $67.4 million last year and $89.5 million in 2005, sale records show. And those amounts are higher than the $32.1 million in 2004, $24.5 million in 2003, $46.7 million in 2002 and $16.5 million in 2001. Prior to that, MMS grouped those tracts with leases in 800 meters of water or deeper. These totals don't even take into account the smaller geography of Sale 204, the first auction featuring redrawn Western Planning Area boundaries. About 20% of the area's eastern flank has been shifted to the Central Planning Area, which will hold its Sale 205 on October 3. Meanwhile, the amount of money spent for deepwater leases is also up from previous years. The average overall high bid per tract increased in Sale 204 nearly 15% from last year -- to $1.03 million from $894,800 in 2006, Credit Suisse analyst Ken Sill observed in a post-sale report. And that is up from $824,250 in 2005, $488,280 in 2004 and $443,920 in 2003. Moreover, companies wading in ultra-deep waters of more than 2,000 meters appear more willing to shell out top dollar for them. Prices paid for these tracts averaged $3.54 million apiece in 2007, $566,150 each in 2006 and $1.35 million in 2005. For tracts in waters 1,600 meters and below, companies averaged bids of $2.08 million in Sale 204, $1.03 million last year and $1.04 million in 2005. In Central Sale 205, the deepwater blocks that had formerly been part of the Western Area may see some heavy bidding, David McCaleb, senior regional manager-frontier North America for industry consultants IHS, said. If those blocks were to be added to the tallies of Western Sale 204, they may make "this year's Western sale even bigger than last year's," he said.