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Western Gulf Sale Results Down From Last Year's Sale

Western Gulf Sale Results Down From Last Year's Sale

The U.S. Department of the Interior's Minerals Management Service (MMS) received more than $741.85 million in 486 bids during the Western Gulf of Mexico Lease Sale No. 171. Winning or high bids totaled $553.4 million for 402 blocks. The results are down sharply from last year's western Gulf sale, and depressed oil prices are likely to blame for dampening enthusiasm for this year's sale.

Last year's sale broke records. A total of 1,224 bids were made on 804 blocks. This time around, a total of 3,778 blocks were offered, and each block received an average of 1.21 bids. There were 63 companies participating. The highest bid was $37.41 million from a group formed by Unocal's Spirit Energy 76 (70%), British Borneo Petroleum (15%), and Seagull Energy (15%) for Alaminos Canyon Block 947. Spirit Energy had the second highest bid on its own, $31.02 million, and Vastar Resources had the third highest bid of $28.30 million.

Overall, Spirit Energy was the apparent high bidder on its own or with partners for interests in 62 deep-water and 15 Continental Shelf blocks. "This lease sale provides a solid underpinning for Spirit Energy's growth plans, and we are very pleased with our results," said Jack W. Schanck, Spirit Energy president. "Our performance in this lease sale represents a solid investment in the foundation we are laying for our future reserve and production growth."

Vastar said it was the apparent high bidder, alone or with partners, on 32 lease blocks. If all the blocks are awarded, the company's deep-water portfolio will grow by 24 blocks to 124, and its shelf portfolio, already more than 300 blocks, will gain eight blocks.

In the sale, 323 blocks in depths of 200 meters or greater received bids. The largest totals for all bids and for high bids were for blocks in depths of 800 meters or more. High bids totaled $499.42 million for blocks in depths of 800 meters or more. There was $17.75 million in high bids in depths from 400 to 800 meters, $4.89 million in high bids in depths of 200 to 400 meters, and $31.38 million in depths less than 200 meters. This is the third sale in the western Gulf and the sixth sale overall in which bidders on blocks in depths greater than 200 meters are eligible for deep-water royalty relief.

Joe Fisher, Houston

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