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MMS rejects $18 million in GOM bids Agency values 16 tracts at $54.4 million; take drops to $297.6 million Petroleum News Houston Staff
The U.S. Minerals Management Service has rejected nearly $18 million in high bids from last March’s Central Gulf of Mexico Lease Sale 185 because they failed to meet the government’s standard for “fair market value” on 16 shallow and deepwater tracts offered in the sale.
The rejections cut the government’s take from the sale to $297.6 million from $315.5 million, while reducing the number of winning bids to 545 from 561, MMS said June 17.
The 16 rejected tracts should draw premium bids at a next year’s Central Gulf lease sale. MMS placed a “mean range” value of $54.4 million on the tracts, over three times initial high bids of $17.9 million, agency records show.
Exploration and production independents, which dominated Sale 185, also accounted for the lion’s share of rejected bids. However, it was Chevron Texaco alone that suffered the biggest blow in terms of sheer valuation, MMS records show.
Chevron Texaco bids of $7.75 million for Green Canyon Block 468 and $3.75 million for Green Canyon Block 512 were unacceptable to MMS, which placed a mean value on the deepwater blocks of $15 million and $17 million, respectively. Highest bid by independents The highest bid in the entire sale and accepted by MMS was for $8.2 million. South Marsh Island Block 109 was won by a group of independents consisting of Hunt Petroleum, Cheyenne International and Energy Partners.
Also in Green Canyon, MMS rejected a high bid of $878,888 jointly placed on Block 238 by Chevron Texaco and Australia’s BHP Billiton Petroleum. The agency valued the block at $1.9 million.
MMS also rejected three deepwater blocks in Mississippi Canyon, the most prolific region of the Gulf, and one in remote deepwater Atwater Valley, MMS records show.
In Mississippi Canyon, BP bids of $157,319 each for blocks 543 and 544 were rejected by MMS, which valued Block 543 at $870,000 and Block 544 at $630,000. A $1.37-million bid from independent Spinnaker Exploration for Block 409 was rejected on a value of $3.6 million.
Similarly, a $701,020 bid from French explorer Total for Atwater Valley Block 96 was rejected on a value of $2.2 million.
The remaining bids rejected by MMS were placed by exploration and production independents for tracts in the relatively shallow waters of the continental shelf, the Gulf’s main producer of natural gas.
In East Cameron, bidding partners Houston Exploration and El Paso Production came up short on offers of $757,777 for Block 85 and $325,825 for Block 80. MMS valued each block at $1.5 million. A $276,350 bid from partners Remington Oil and Gas and Magnum Hunter for Block 158 was rejected on a value of $1.3 million. Likewise, a $187,552 bid from Seneca Resources for Block 213 was rejected on a value of $1.1 million.
In Vermilion, Remington and Magnum Hunter again lost out on a $511,150 bid for Block 137. The block was valued at $1.4 million. Also, a $141,957 bid for Block 147 was rejected on a value of $1.8 million.
In the Eugene Island area, the bidding team of Newfield Exploration and Gryphon Exploration had its $223,000 bid for Block 114 rejected by MMS on a value of $1.8 million. A $141,957 bid by Tana Exploration for Block 154 was shot down on a value of $1.3 million.
Finally, a partnership consisting of Newfield, EOG Resources and CL&F Resources was turned away with a bid of $593,100 for South Timbalier 155. MMS valued the block at $1.5 million. Kerr-McGee dominant player By far, Oklahoma’s Kerr-McGee, also an independent, was the dominant player in Central Gulf of Mexico Lease Sale 185 with MMS accepted high bids of $28.2 million and 63 tracts.
Other top winners ranked by total high bids were Murphy Exploration & Production with $21.5 million in successful bids and 35 tracts, Unocal with $18.7 million in bids and 27 tracts, Dominion Exploration & Production with $14.3 million in bids and 12 tracts, Newfield with $11.8 million in bids and 49 tracts, BHP with $9.6 million in bids and 49 tracts, Chevron Texaco with $9.3 million in bids and 38 tracts, and Magnum Hunter with $7.7 million in bids and 38 tracts.
MMS’ next offering, Western Gulf of Mexico Lease Sale 187, is scheduled for August 20 in New Orleans, Louisiana. The sale area will include 3,985 blocks encompassing 21.7-million acres.
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