Houston — US Gulf of Mexico Lease Sale 249 on Wednesday was not a barn-burner, but it did show a measure of competitive bidding in the deepwater and even boasted two eight-figure bids and dozens more that topped $1 million each.
¿No está registrado?
Reciba alertas diarias y avisos para suscriptores por correo electrónico; personalice su experiencia.Registro
The sale appeared to highlight majors' preferences for known deepwater areas, since shallow-water bidding accounted for a scant 10 blocks and offers received for these were mostly under $200,000 each.
But sale sponsor Bureau of Energy Management officials expect interest in shallow water bidding to improve in subsequent sales, owing to the agency's recent lower royalty relief reduction aimed at drumming up more development in that arena.
"We only provided a month's time for [operator] interest in the lower royalty," said Mike Celata, BOEM Gulf regional director, in a post-sale telephone press conference. "My expectation is that in March we'll have greater interest."
In July, the agency reduced the royalty rate for leases in water depths less than 200 meters to 12.5% from 18.75%.
High bids in Sale 249 totaled $121 million, while the sum of all bids including those apparently not successful, was $137 million, BOEM statistics showed. That compares to $275 million and $315 million respectively at the last US Gulf sale in March 2017.
TOTAL OUTBIDS COBALT WITH TOP SALE SUM
At Wednesday's auction, France's Total made the sale's apparent high bid of $12.1 million for a deepwater lower-Garden Banks area bid in the Gulf's remote Lower Tertiary play, out-elbowing Cobalt International Energy which offered $3.5 million for it.
The lease, GB Block 1003, is located south of the small US independent's large North Platte discovery at GB 959. Both Cobalt and Total had been partners in GB 1003, which Cobalt won in a 2006 Gulf auction for $837,880. The lease expired last year. Before that, BP had won it in 1997 for $406,817.
Cobalt claims North Platte, three miles to the north, is a giant containing 500 million barrels of oil equivalent, but the cash-strapped company is selling down some or all its interest in it. Bids were due last month.
In addition, ExxonMobil plunked down $10.8 million for a tract in lower Mississippi Canyon near the giant Thunder Horse Field where it is a partner with operator BP. There were no other rival bids for the tract, which Shell formerly leased in 1998 but handed it back to BOEM in 2008.
ExxonMobil made several other bids in the lower Mississippi Canyon, as did BP, that Celata said may be aimed at shoring up their acreage around the field.
"There were six to eight bids in that area on leases we think were offsets or analogues" of that field, Celata said.
Chevron and Shell, both top US Gulf players despite oil prices south of $50/b and less rank exploration in recent years, were the most aggressive bidders in terms of both total numbers and amounts of high bids. Shell made 19 offers, placing $25 million in high bids, and Chevron offered fewer bids (15) but will pay more for them, $27.9 million.
CHEVRON, SHELL BID AROUND PERDIDO
The pair made a number of separate, $1 million-plus bids in Lower Alaminos Canyon that Celata said was likely associated with the Shell-operated Perdido Hub which produces fields in that area.
The half-hour sale, live-streamed over the Internet from New Orleans, featured 99 bids across 90 blocks, notably smaller than the March 2017 Central Gulf sale where 189 bids were spread across 163 blocks.
Sale 249 was the first region-wide US Gulf auction in 35 years. Previous sales were restricted to either Central Area acreage offshore Louisiana, Mississippi and Alabama, or Western Area blocks offshore Texas.
"There's something to be said for having a Gulf-wide sale," said Katharine MacGregor, acting assistant secretary for land and minerals at the Interior Department, who read bids at the auction.
While there were a few dozen bids ranging from $1 million-$5 million apiece at the auction, most were under $1 million.
Also, most of the offers were singletons with no competition, and for the nine blocks where some rivalry existed it was virtually all majors squaring off against each other for deepwater acreage, seemingly around existing discoveries or fields.
"I think this is a continued investment in the Gulf of Mexico, with companies looking at Lower Tertiary and Miocene [geological] trends," BOEM Gulf regional director Mike Celata said of the auction's offers.
Wood Mackenzie senior research analyst William Turner noted the 76 deepwater blocks attracting bids generated 98% of high bid value, or $118 million.
"The deepwater industry is emphasizing short-cycle, low-risk prospects [rather than] impact, wildcat drilling," Turner said. "Operators continue[d] to focus on areas near existing infrastructure with a majority of bids close to existing hubs or appraised developments."
But bids from Chevron, Shell and Total near North Platte and also Guadalupe, a Chevron 2014 deepwater discovery, were a "vote of confidence in higher-risk standalone developments," he said.
--Starr Spencer, firstname.lastname@example.org
--Edited by Richard Rubin, email@example.com