Gulf of Mexico Lease Sale Draws Little Attention

Offshore drill rig
Offshore drill rig

The US Department of Interior's Bureau of Ocean Energy Management (BOEM) on Wednesday held a lease sale for approximately 21 million acres of US outer continental shelf open for development in the western Gulf of Mexico. The total of all bids came to $157.68 million for 653,00 acres. That's a far cry from the June sale, which brought in $2.6 billion on leases for 2.4 million acres.

The roster of bidders totaled just 13 companies, including Exxon Mobil Corp. (NYSE: XOM), ConocoPhillips (NYSE: COP), Chevron Corp. (NYSE: CVX), Apache Corp. (NYSE: APA, Anadarko Petroleum Co. (NYSE: APC), BHP Billiton plc (NYSE: BHP), and Plains Exploration & Production Co. (NYSE: PXP). The June auction attracted 56 bidders.

Notably absent from the list is BP plc (NYSE: BP), which paid nearly $240 million for new leases at the June auction. BP was not barred from the bidding, but in order for the BOEM to have accepted a bid from the company, BP and the U.S. EPA would have reached an agreement to end the temporary suspension that the EPA recently slapped on BP.

Of the 10 highest bids, just two were made for leases in water more than 1,600 feet deep and only 1 in shallow water. The remaining seven high bids were made for leases in water between 800 and 1,600 feet deep.

The single highest bid came in at $157 million for a block in the Mississippi Canyon area. The block received four bids and the eventual winner was Statoil's Mexican subsidiary.

Chevron led the big spenders, with a total of $56 million, followed by Conoco ($51 million), BHP ($14.5 million), and Exxon ($5.9 million).

The BOEM estimates that hydrocarbon recovery from the leased areas will yield 116 to 200 million barrels of oil and 538 to 938 billion cubic feet of natural gas. The federal royalty rate on production from these sales is 18.75%.

Before leases are awarded the BOEM evaluates the winning bids "to ensure the public receives fair market value before a lease is awarded."

Paul Ausick

Filed under: 24/7 Wall St. Wire, Commodities, Oil & Gas, Regulation Tagged: APA, APC, BHP, BP, COP, CVX, PXP, XOM