Houston — Bidders in US Gulf of Mexico Lease Sale 253 on Wednesday appeared interested in what may be a new play area in that region's midsection, suggesting a willingness to venture outside of more developed offshore areas.

Even with WTI crude lingering in the $50s/b, the lease sale turned in a solid $159 million in high bids - 35% less than the previous sale earlier this year but enough to make combined 2019 sale totals the highest since 2015.

"We're really pleased with the totals to see this upward trend [in high bid totals] during the last few years," Andrea Travnicek, Deputy Assistant Secretary for Land and Minerals Management at the US Department of Interior, said in a media conference call following the event.

Not only that, but notable deepwater discoveries this year, and a high production level in the Gulf near 2 million b/d, "bode well for the Gulf of Mexico for years to come," Mike Celata, director of the US Bureau of Ocean Energy Management's New Orleans office, which sponsored the auction, said.

Companies, particularly majors, appeared willing to bet on new plays for modest sums mostly under $1 million per tract, that if successful could pay off in production in the next decade.

For example, BHP of Australia and Equinor of Norway took turns bidding on and apparently winning more than 30 blocks between them in the Garden Banks and East Breaks area of the Central Gulf.

In particular, "East Breaks is pushing the boundaries of the Lower Tertiary, a little father north and west" of the traditionally leased acreage in that area, Celata said. The Lower Tertiary play is located in deep waters, at deep depths, he added.

In addition, BP apparently won six tracts in the deep, remote Lloyd Ridge area on the edge of the Eastern Gulf, continuing to grab acreage in what may be a new deep presalt play that it and Shell began leasing in the March 2019 sale.

Shell and BP, meanwhile, separately continued to bid for and apparently win blocks in the emerging Norphlet play also along the Eastern Gulf rim. Shell's Appomattox field became the first Norphlet play field to come online in May.

High bidders in Gulf sales are not guaranteed winners. BOEM has 90 days to evaluate offers to assure the bonus paid to the government is large enough to compensate value of estimated hydrocarbon reserves. The leases should be awarded later this year.

The 165 bids across 151 blocks in Sale 253 were lower than the 257 bids across 227 blocks in the previous auction in March. But the two auctions show that on a full-year basis the number of blocks receiving bids in 2019 (378) is the highest since the 400 leased in 2014, Celata noted.

Likewise, total high bids in 2019 equal $404 million, the highest since 2015's $562 million, he said.

Some 27 E&P operators participated in Sale 253, about the same as 30 in March 2019 and in-line with other sales in recent years.

While the vast majority of Sale 253 bids were under $1 million, and sometimes well under that line, the auction had plenty of seven-figure offers.

BLOCK NEAR MACONDO MOST VIED FOR

The most sought-after block in US Gulf of Mexico Lease Sale 253 sits right next to what is arguably the best-known tract in that region - the Macondo lease, where the Deepwater Horizon rig exploded nearly a decade ago and caused the biggest oil spill in the region's history.

Four companies vied for Mississippi Canyon Block 253 Wednesday, a tract immediately to the east of what was called Macondo, in the latest of two yearly Gulf oil and gas E&P auctions, according to information supplied by sale sponsor US Bureau of Ocean Energy Management, or BOEM.

Macondo was located on MC Block 252, where 4.9 million barrels leaked for three months from a well that had just been drilled on the lease prior to the explosion and was afterwards sealed.

The four bids received by Shell, Chevron, small operator Kosmos Energy and privately held Fieldwood Energy, were each less than $1 million, but Shell narrowly won the contest, offering $836,000 for the tract.

LARGEST BID WAS $22.5 MILLION BY BHP

Far and away, the $22.5 million that BHP offered for a block in the prolific deepwater Green Canyon area offshore Louisiana was the largest bid in the auction.

"This block had been bid on and rejected by BOEM in each of the last four [lease sales]," William Turner, an analyst for upstream consultancy Welligence, said. "Clearly there is something interesting there."

The second-highest was $6.7 million by Chevron for a deepwater lease in the prolific southern Mississippi Canyon area, besting Shell's $3.1 million offer for the same tract.

Also, Shell offered $5.6 million for Alaminos Canyon Block 341, which is sited near its Blacktip discovery announced in April. The find, in a remote deepwater area of the southern US Gulf, is 30 miles from the major's Perdido field and producing hub.

Blacktip also is situated about 15 miles west of AC 341, which Shell apparently won on Wednesday. The tract is adjacent to another block, AC 340, for which Shell bid $1.2 million, also an apparent win. Shell was sole bidder on both tracts.

In another notable feature of Sale 253, Anadarko Petroleum, which was acquired earlier this month by Occidental Petroleum, placed bids on at least a dozen blocks, mostly in the Keathley Canyon area where Anadarko had owned the Lucius producing hub. Those assets passed to Oxy in the $57 billion acquisition.

Many US Gulf observers have wondered if Oxy, which has not operated in that arena for a dozen years but instead focused on its onshore Permian Basin unconventional and CO2 operations in the US, will keep the Gulf assets or sell it to repay debt from the purchase.

"Bringing new growth opportunities into the portfolio is important regardless of [Oxy's forward plans for the US Gulf unit]," Turner said.

-- Starr Spencer, starr.spencer@spglobal.com

-- Edited by Jeff Mower, newsdesk@spglobal.com