Houston — Results from Wednesday's US Gulf of Mexico lease sale suggest that oil operators are once again starting to think long-term, selecting acreage in frontier plays that may not pay off for a decade or more.
¿No está registrado?
Reciba alertas diarias y avisos para suscriptores por correo electrónico; personalice su experiencia.Registro
Bidders in Lease Sale 251 appeared more willing to focus on deepwater exploratory prospects than in the last couple of auctions, when companies chose acreage for its proximity to infrastructure and near-term production prospects, Mike Celata, regional Gulf director for the US Bureau of Ocean Energy Management, said.
"Today you saw some companies willing to look at [new] opportunities," as big independent producer Hess and majors ExxonMobil and Norway's Equinor apparently won large block clusters in more remote areas where infrastructure is less built-out than where their current production is, Celata said at a press conference following the sale.
For example, ExxonMobil grabbed a 10-tract cluster in the DeSoto Canyon area offshore Alabama, while Hess appeared to be chasing a certain type of geology in the Viosca Knoll area offshore Louisiana.
Celata thought ExxonMobil was looking at the Norphlet play that has been pioneered by Shell in such discoveries as Appomattox and Vicksburg, while Hess was likely pursuing Miocene-age rocks at relatively modest depths.
"[ExxonMobil] is a little southeast of most of the Norphlet discoveries near an area where there were some dry holes," he said.
But Equinor's interest seemed drawn towards the deeper and more remote Lower Tertiary play in faraway Alaminos Canyon in the southern US Gulf where it has stakes in several discoveries such as ExxonMobil-operated Julia and Chevron-operated Jack/St Malo.
On the other hand, Chevron and Shell, which typically are among the top few bidders in terms of number of leases and total high-dollar amounts offered, were not as active in Wednesday's sale, although Chevron offered the auction's second-highest bid of $11 million while Shell offered the sixth-highest sum of $4.6 million.
Results of Wednesday's sale are preliminary since BOEM has 90 days to review the bids and assure that the offers are at fair market value. The agency often rejects several bids in each auction.
The sale comes at a time when many operators have either exited or focused less on the Gulf as the lure of onshore shale has promised less risk and quicker paybacks.
HESS OFFERS SINGLE HIGHEST BID
Hess took honors for the highest bid of nearly $26 million for a block in the Mississippi Canyon area offshore Louisiana, less than 10 miles from the Macondo tract. Macondo was the prospect at the center of the Deepwater Horizon disaster in 2010.
Hess, which has both including a Bakken Shale operation in North Dakota, said the 16 tracts it apparently won in Wednesday's sale are located in and around its existing operating areas that include seven producing fields.
"The Gulf of Mexico is a significant part of our portfolio and an important cash generator for Hess," company spokesman Rob Young said. Those blocks "are centered over core exploration areas of interest near our existing footprint."
The Chevron and Shell leases are also located in Mississippi Canyon, although much further south. That area is the site of some of the Gulf's biggest oil fields such as BP's Thunder Horse and Na Kika.
Lease Sale 251 didn't set off fireworks dollar-wise, but it surpassed the high-bid sum total of two previous auctions during the last year and attracted more participants.
Total high bids weighed in at $178 million, more than the $124.7 million last March and $121 million in August 2017.
But that is down from sales of a few years ago when robust bidding could result in $500 million or more of high bids. Even in March 2015, as low crude prices that would last three years started to worry the oil industry, the first of two auctions that year totaled $539 million.
Companies showed confidence in the region based not only on dollar amount from the last sale, but with an increase in competitive bids, William Turner, senior research analyst at Wood Mackenzie, said.
"Roughly 40% of blocks this round made a return from lease sales in 2007 and 2008, including a sizable portion of blocks towards the east picked up by ExxonMobil, previously held by Shell," Turner said.
Celata believes next year's auctions could exceed even Sale 251 in size, since the potential for more deepwater lease expirations with 10-year terms from sales a decade ago may be coming up.
"A lot of acreage had been bid on before [years ago] that companies had been interested in," he said. "In our newly available blocks, relinquishments were down" in Sale 251 to 285, compared to 338 in the March 2018 sale.
--Starr Spencer, email@example.com
--Edited by Gary Gentile, firstname.lastname@example.org