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Gulf sale turns heads MMS sale draws most bids in 6 years; shallower waters see most action Ray Tyson Petroleum News Houston Correspondent
Gulf of Mexico Lease Sale 190 turned out a lot better than the federal government had anticipated, generating a healthy $368.8 million in apparent high bids and attracting the largest number of bids for a Central Gulf offering in six years. Last year’s Central Gulf sale netted $297.6 million.
The U.S. Minerals Management Service had expected a “subdued” turnout for Sale 190, based on what it concluded was a lack of key “drivers” in the sale. Instead, 83 companies stepped up to the plate March 17 in New Orleans, La., with 829 bids submitted on 557 of the 4,324 blocks offered in the areawide lease sale. The total of all bids was $636.8 million.
Two adjacent deepwater blocks alone accounted for $66.4 million or nearly 20 percent of total high bids, and drew some of the heaviest competition with five bids placed on each block. Amerada Hess captured Green Canyon block 468 with a sale high bid of $35.3 million, while a partnership consisting of Nexen Petroleum, Anadarko Petroleum, BHP Billiton and Unocal picked up nearby Green Canyon block 512 for $31.1 million, the sale’s second highest bid.
Hess characterized its Green Canyon 468 tract as one “one of the most sought after blocks” of the entire lease sale because of its strategic position “in the prolific Lower Miocene trend.” Blocks 468 and 512 are in the same general eastern area of Green Canyon and western Atwater Valley that have given rise to such major discoveries as Tahiti, Holstein, Mad Dog, Atlantis, Marco Polo and Neptune.
Sale participants, bidding within a 23 million acre area offshore Louisiana, Alabama and Mississippi, also demonstrated they were willing and financially able to venture into the remote ultra-deep waters of the Gulf over 5,000 feet. EnCana submitted the sale’s third highest bid, beating out five other contenders to take Walker Ridge block 969 with a bid of $8.2 million. Shallower waters draw most action Although deeper waters of the Gulf generated the highest bids, it was the shallower waters of the Continental Shelf that drew most of the action. Sixty percent of all bids submitted in Sale 190 were for blocks on the shelf, indicating industry’s continuing love affair with natural gas.
“We believe this reflects definite industry interest in deep gas in shallow waters in response to royalty relief,” MMS Director Johnnie Burton said.
MMS recently expanded both the size and scope of its so-called Deep Gas Initiative to encourage more drilling on the shelf, where gas production is in steep decline. In a region of the Gulf where bids over $1 million are not typical, the shelf drew three of the top ten highest bids and some of the heaviest competition in Sale 190. Hunt Oil was a winner on South Timbalier block 155 with a bid of $5.3 million. El Paso and Houston Exploration teamed up with a winning bid of $4.8 million on West Cameron block 62. And Tana Exploration shelled out $4.2 million for Eugene Island block 98. Magnum Hunter gains most blocks Of the 557 blocks receiving bids in the sale, 396 received single bids, 96 received two bids, 43 received three bids, 11 received four bids, four received five bids, four received six bids, and three blocks received eight bids.
In terms of the number of blocks won, Magnum Hunter led the pack collecting 55 blocks with bids totaling $8.4 million. Other top ten winners based on the number of blocks won were BHP with 32 blocks and $18.5 million in bids, Chevron U.S.A. with 29 blocks and $10 million in bids, Remington Oil & Gas with 25 blocks and $4.6 million in bids, BP Exploration and Production with 24 blocks and $6.2 million in bids, Noble Energy with 24 blocks and $6.1 million in bids, ConocoPhillips with 23 blocks and $6.6 million in bids, Kerr-McGee with 22 blocks and $9.1 million in bids, Woodside Energy with 21 blocks and $4.2 million in bids, and Pioneer Natural Resources with 19 blocks and $8.3 million in bids. Amerada Hess top spender In terms of dollars, Hess led all participants with $40.7 million in high bids on 17 blocks. Other top five spenders were BHP with $18.5 million in bids on 32 blocks, Stone Energy with $15.5 million in bids on eight blocks, Pogo Producing with $12.6 million on 15 blocks, and Tana Exploration with $12.1 million on ten blocks.
Kerr-McGee, the largest independent operator and producer in deepwater Gulf, and its bidding partners captured eight shelf and 14 deepwater blocks in the sale.
“These new leases will strengthen our shelf and deepwater portfolio, adding acreage in our existing core areas and several new opportunities,” said Dave Hager, Kerr-McGee’s senior vice president responsible for exploration and production.
Noble Energy, another large independent, said it bid with partners on two blocks and bid alone on the remaining 22 blocks it won. All of the shelf blocks Noble successfully bid “contain deep objectives below 15,000 feet,” the company said.
Noble said it concentrated its bids on “opportunities” in the West Cameron, Chandeleur and Mobile Bay areas, but also submitted bids on several tracts in the South Marsh Island, Viosca Knoll, Mississippi Canyon and Green Canyon areas.
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