Steven Poruban
Senior Staff Writer
Oil and Gas Journal
HOUSTON, Mar. 28�Royalty relief incentives to drill for deep gas in shallow waters, along with the continuing attraction of deepwater Gulf of Mexico exploration, were the drivers in a strong central gulf lease sale Wednesday.
Apparent high bids in the sale totaled $505,468,501. Ninety companies filed 780 bids exposing $663,406,963 for 547 tracts. The sale offered 4,390 blocks in the central gulf planning area off Louisiana, Mississippi, and Alabama.
The US Minerals Management Service held the sale in New Orleans, La. The sale was billed as Part 1 of Sale 178. Part 2 will be held concurrently with the western gulf Sale 180 in August. It will offer some of the blocks in the central gulf portion of the �Western Gap,� an area subject to a recent US-Mexico boundary agreement.
The sale drew 60% more bids than the central gulf sale a year ago, No. 175, which netted $292,771,205 in high bids. That sale received 469 bids from 63 companies on 344 blocks (OGJ, Mar. 20, 2000, p. 34).
Smaller companies bid heavily in the Wednesday sale. There were few majors in the top ten bidders of the sale, which were (in order): Exxon Asset Management Co. at $89 million, Kerr-McGee Oil & Gas Corp. $59 million, Samedan Oil Corp. $40 million, Murphy Exploration & Production Co. $39 million, BP Exploration & Production Inc. $36 million, Anadarko Petroleum Corp. $33 million, Dominion Exploration & Production Inc. $32 million, Spinnaker Exploration Co. LLC $32 million, Shell Offshore Inc. $28 million, and Chevron USA Inc. $27 million.
Acting MMS Director Tom Kitsos said, �We are very pleased with this sale. Strong bidding by the independent oil and gas companies was major part of the sale, and we are particularly pleased with the high interest shown in the shallow water area where deep gas deposits may be present."
Kitsos noted that 11 companies in the sale were first-time bidders.
High bids
Exxon submitted the highest bid for a single tract: $26,115,000 for Mississippi Canyon Block 912. This block also received the highest per acre bid at $4,533.85.
The block, which is in more than 1,600 m of water, also drew three other bids, from Amerada Hess Corp., Nexen Petroleum Offshore USA Inc., and BP.
Kerr-McGee submitted the second highest bid in the sale: $18,378,000 for Green Canyon Block 680. Exxon had the third highest bid in the sale with $18,315,000 for Mississippi Canyon Block 956. That tract also drew the most bids, six.
Chevron had the most high bids for tracts, 53, totaling $23.9 million. Magnum Hunter Production Inc. was second with 45 high bids totaling $5.5 million. Third was Samedan with 33 high bids totaling $27.5 million.
Shallow water
The shallow water gulf�acreage in less than 200 m of water�drew the highest amount of total bids, $227,653,997.
But, not surprisingly, companies paid heavily for deepwater acreage as well. Blocks in more than 800 m to 1,599 m of water drew $195,355,512 in total bids, while ultradeepwater tracts, in depths greater than 1,600 m, fetched bids totaling $171,911,962.
The deepest block receiving a bid was Walker Ridge Block 146 in 2,365 m of water. Chevron USA Inc. bid for that block.
David Pursell, an analyst with Simmons & Co. International, Houston, said the consulting firm was watching whether the MMS�s royalty relief for deep gas from shallow water acreage would be enough of an incentive to draw majors and the larger independents closer toward the gulf coast.
An anticipated mantra of the sale might have been �shallow water, drill deep,� he said.
Among the more interesting things about this most recent central gulf sale, Pursell said, was that the deepwater blocks� winning bids drew the highest dollar amount per acre.
Pursell said in the 1998 central gulf lease sale, deepwater tracts receiving winning bids averaged $191/acre. In today�s sale, those blocks� winning bid was $281/acre.
Spinnaker said it and partners Murphy Oil Corp. and Dominion submitted ten apparent high bids near its recently announced Front Runner discovery on Green Canyon Blocks 338 and 339.