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Western Gulf Lease Sale 187 generates $148.7 million in total high bids Single block on continental shelf draws winning bid of $22.6M Petroleum News
Western Gulf of Mexico Lease Sale 187 was no barn burner, generating $148.7 million in apparent high bids on 335 tracts that received mostly single bids. But there was one notable exception, and it occurred in an area of the Gulf that seldom attracts multi-million dollar bids.
In the relatively shallow waters of the aging continental shelf, 13 bidders with a notion to spend exorbitant amounts of money placed their bets on High Island Block 170. When the bids were opened and announced Aug. 20 in New Orleans, jaws dropped. LLOG Exploration Offshore, a privately owned independent from Louisiana, emerged victorious with a high-flying $22.6 million bid, by far the largest bid placed in the entire sale.
Those kinds of bids are generally reserved for deepwater tracts and the majors. But all 13 bids placed on High Island Block 170 were submitted by independents.
Newfield Exploration registered a close second on High Island Block 170 with a $21.8 million bid, followed by partners The William G. Helis Co. and Houston Energy with an $18.5 million bid and partners Gryphon Exploration and The Houston Exploration Co. with a $12.5 million bid. Of the 13 bids submitted on the tract, seven were over $6 million.
High Island Block 170 is thought to be gas-prone and had been off the market since 1981, when ExxonMobil acquired it for some $62 million. The tract was only recently returned to MMS for re-offering in Sale 187. Amerada Hess leads overall bidding Amerada Hess led the overall bidding, shelling out $15.6 million for 59 tracts. Other leading bidders were BHP Billiton with 56 tracts and $8.2 million in high bids, BP with 36 tracts and $9.2 million in bids, Newfield with 20 tracts and $1.9 million in bids, Kerr-McGee with 19 tracts and $6.2 million in bids, Total Exploration & Production USA with 18 tracts and $4.7 million in bids, Chevron USA with 18 tracts and $4.6 million in bids, Gryphon Exploration with 17 tracts and $6.8 million in bids, Devon Energy with 16 tracts and $3.4 mil in bids, and ExxonMobil with 14 tracts and $4.9 million in bids.
With robust commodity prices and government royalty relief for geologically deep gas discoveries, industry observers assumed most of the 407 bids submitted in Sale 187 would be placed on the continental shelf. Just the opposite happened. Sale results show that just over 67 percent or 225 of the tracts receiving bids are located in water depths over 200 meters, compared to 32.8 percent or 110 tracts on the shelf. Fifty-seven percent or 180 of all tracts receiving bids are in water depths greater than 800 meters, with 95 these blocks located in 800 to 1,599 meters of water and 85 in water depths greater than 1,600 meters.
The fact many of the deepwater tracts received single bids and low bonuses indicates companies were looking to shore up existing prospects or build inventories to search for new prospect leads. Sale results show that aside from the shelf block that attracted 13 bids, only two blocks received four bids, six received three bids and 42 received two bids. The remaining tracts received single bids.
France's Total managed to net 18 uncontested blocks in the so-called Western Gap in Keathley Canyon, which forms the boundary between U.S. and Mexican territorial waters. Devon out bid Total on another four Gap blocks. Gap blocks are located in about 10,000 feet of water.
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