GOM just saw the strongest sale in two years with $244 million in total high bids

Upstream operators in US Gulf of Mexico Lease Sale 252 on Wednesday focused much of their bids around existing discoveries or fields in proven productive areas, a harbinger of quicker production from that oil-prone arena and an ongoing trend in recent years.

The auction, which fetched $244 million in total high bids and $284 million for all bids, was the strongest in two years in the US Gulf and featured majors, large independents and a handful of smaller companies capturing tracts across the region from offshore Alabama to ultra-deep remote areas near Mexican territorial waters.

“It’s very positive,” Mike Celata, Gulf of Mexico regional director for sale sponsor US Bureau of Ocean Energy Management, said of the auction’s numbers in a post-sale telephone press conference. Also, “the bidding in potential new plays shows potential growth in Gulf of Mexico [production] in the future, and the consistency of deepwater for the long term.”

The 30 participating companies were roughly on par with recent sales of the last couple of years, with only ExxonMobil – traditionally one of the biggest spenders in Gulf lease sales – conspicuously absent, William Turner, senior research analyst at Wood Mackenzie, said.

“It seems those left in the Gulf of Mexico are committed to the region and taking this opportunity to quietly strengthen their prospect inventory,” Turner said.

More bids, more blocks receiving offers

The sale captured 257 bids spread over 227 blocks, higher than the 171 bids across 144 blocks in the August 2018 sale, when $178 million was placed for high bids. It also surpassed the 159 bids across 148 tracts in the March 2018 auction, which took in $125 million in high bids.

Majors and large independents with deeper pockets were especially active in the auction – the first of two sales planned for 2019 – which was live-streamed from BOEM officies in New Orleans.

Shell in particular was the winner by far in numbers of apparent high bids (87) – a contrast to its mere three high bids in the August 2018 sale.

Sale 252 also snagged a number of multi-million dollar bids from its 30 participants, including some in the eight figures.

The highest offer of the sale came from Equinor – $24.5 million for a tract in the prolific lower Mississippi Canyon area that Turner said was adjacent to W&T Offshore’s operated Gladden Deep exploration prospect.

“It was the most competitive block in the round, receiving four bids totaling over $37 million,” he noted.

Many blocks that received bids appeared to aim at shoring up existing fields, as the new acreage may hold the potential for new discoveries that can be produced through nearby production hubs. For example, Anadarko Petroleum’s apparent winning seven bids in the Viosca Knoll area are sited around its Marlin and Horn Mountain platforms.

Hess also was apparent winner of a block for $10.1 million in the central Mississippi Canyon area, northeast of its Tubular Bells development, and also was high bidder on another tract for $4.1 million in Green Canyon, which is about six miles north of its Stampede field that began producing last year.

Total wins block near Thunder Horse

France’s Total – a spare bidder in Sale 252, only winning two blocks – picked up a Mississippi Canyon block for $6 million. The tract, in 6,100 feet of water, was drilled a dozen years ago by Murphy Oil but deemed non-commercial. But technology advances since then may offer better reservoir characterization. The block is near BP’s giant Thunder Horse field.

Even when the sums offered in Sale 252 acreage weren’t large, there were distinctive bidding patterns. For example, Shell’s 87 blocks were scattered in several deepwater areas, but in clusters of small contiguous blocks throughout eastern and western areas of the Gulf.

One area of Shell’s concentration of two- and three-block clusters was specifically in the eastern Gulf’s De Soto Canyon and Lloyd Ridge areas, where bids were “clearly looking at the exploration opportunities,” rather than hook-ups to production facilities, the BOEM’s Celata said.

Despite the handful of eight-figure bids, a majority of tracts were whisked off at prices well below $1 million apiece and some even below $100,000 each.

LLOG Exploration likewise picked up a four-block cluster in deep, remote Keathley Canyon not far from its Buckskin field for a combined $2.6 million.

In addition, one of the “most interesting details” of Sale 252 were what Turner called “unique partnerships” between majors and smaller players.

These included Equinor and Kosmos Energy, which last year entered the US Gulf by acquiring Deep Gulf Energy; privately held Fieldwood Energy with Chevron; LLOG Exploration, the Gulf’s largest privately held operator, with BP; and Talos Energy with Colombia’s Ecopetrol.

“This demonstrates a shrinking pool of partners, but also an increased willingness of the majors to partner with these more nimble players,” Turner said.

Source: Platts

Source:US Bureau of Ocean Energy Management

Source: US Bureau of Ocean Energy Management

Check out our other current stories!

• What social media means for people that are on rotational work
• Neptune Drilling picks up the Odfjell managed Beacon Atlantic for 6 wells plus
• Rig sale leads Precision to exit Mexico

Join the largest oil and gas community on iOS and Android!

Download the app here!