A cadre of 30 oil and gas producers submitted 257 total bids in Wednesday’s Gulf of Mexico (GOM) region-wide auction, with the Mississippi Canyon drawing the highest bid and a unit of Royal Dutch Shell plc far and away outbidding everybody.
Overall, Lease Sale 252 overseen by the Interior Department’s Bureau of Ocean Energy Management (BOEM) reported offers for only a fraction of the region-wide GOM blocks on offer, but the estimated high bids eclipsed the previous two lease sales.
The block receiving the highest number of bids at four and the highest bid overall was in the deepwater Mississippi Canyon, where Equinor Gulf of Mexico LLC made a claim for Block 801 at $24.5 million. The company, long a GOM explorer, is a unit of Norway’s Equinor ASA.
The deepest deepwater block receiving a bid in 3,054 meters of water was Block 456 in Lloyd Ridge.
In fact, the top three single highest bids were for Mississippi Canyon, with Hess Corp. offering the high bid of $10 million for Block 684, and Total E&P USA Inc. capturing Block 693 with a $9 million offer. The seventh and eighth highest bids also were in the deepwater destination, with Total offering $6 million for Block 737, and Anadarko US Offshore LLC offering a high bid of nearly $5 million for Block 783.
The intrigue in Mississippi Canyon may relate in part to two discoveries announced by BP in January at the Manuel and Nearly Headless Nick prospects. The Manuel discovery is in Block 520, east of the producer’s Na Kika platform, where the well encountered oil pay in Miocene sandstone reservoirs. The reservoir is expected to be developed via subsea tieback to Na Kika.
BP also has a 20.25% stake in the Nick discovery in Block 387, operated by LLOG. The well encountered oil pay also in Miocene sandstone and is expected to be tied back to the nearby LLOG-operated Delta House facility. Partners include Kosmos and Ridgewood Energy.
Another draw for Mississippi Canyon Block 801 is that it is “next door to the W&T Offshore Inc.-operated Gladden Deep exploration prospect,” said Wood Mackenzie’s William Turner, senior research analyst.
Shell Offshore Inc. blew past every other bidder overall in the auction, with 87 of the highest offers for a total of almost $85 million. Anadarko was second with 27 high bids worth about $24 million. BP Exploration & Production Inc. was third with 23 high bids totaling $15.5 million.
The fourth highest bidder, W&T, had 15 high bids worth $3.5 million. Hess made 12 high bids worth about $18 million, while Kosmos Energy Gulf of Mexico Operations had nine for about $11 million. Chevron U.S.A. Inc. made eight high bids for $12 million.
Beacon Offshore Energy Exploration LLC ($5 million), LLOG Exploration Offshore LLC ($4 million) and Fieldwood Energy LLC ($3 million) each had seven high bids.
Of the 14,653 blocks on offer across 78 million acres of the GOM, only 227 received bids. Total bids in the sale were nearly $284 million, with high bids totaling about $244 million. By comparison, a similar region-wide auction last August resulted in total bids of nearly $203 million.
"We saw a modest increase in overall spend, but it was outpaced by the increase in acreage leading to lower amount per acre, furthering our hypothesis that it is a buyer’s market in the Gulf of Mexico,” Turner said. “The number of companies participating has thinned out, with the only notable absence being ExxonMobil. It seems those left in the Gulf of Mexico are committed to the region and taking this opportunity to quietly strengthen their prospect inventory.”
There were “unique partnerships” in this lease sale between the majors and smaller players, with Kosmos and Equinor teaming up,” Turner said. Fieldwood is working with Chevron and LLOG is partnering with BP. “This demonstrates a shrinking pool of partners, but also an increased willingness of the majors to partner with these more nimble players.”
Most of the action was in the deepwater, with 95 blocks getting high bids in water depths more than 1,600 meters deep. There were 84 offers for blocks in water 84-1,599 meters deep. Twenty-five shallow water blocks (up to 200 meters) got high bids, while 15 blocks in waters 200-399 meters also received bids. Eight high bids were fetched in water 400-799 meters deep.
BOEM live streamed Lease Sale 252 from New Orleans, the fourth of 10 auctions in the 2017-2022 National Outer Continental Shelf Oil and Gas Leasing Program. Two sales are scheduled each year to include all available blocks in the combined planning areas; Lease Sale 253 is scheduled in August.