'Fierce' competition expected for MMS Lease Sale 204

The US Department of the Interior's Minerals Management Service received 358 bids from 40 companies on 282 of the 3,338 tracts offered in Lease Sale 204 in the western Gulf of Mexico off Texas.

Aug. 22, 2007

2 min read

By OGJ editors
HOUSTON, Aug. 22 -- The US Department of the Interior's Minerals Management Service received 358 bids from 40 companies on 282 of the 3,338 tracts offered in Lease Sale 204 in the western Gulf of Mexico off Texas. The sale is to take place Aug. 22 in New Orleans.

"This lease sale covers 18 million acres, with water depths ranging from 13 to 11,237 ft, and is believed to contain up to 423 million bbl of oil and 2.64 tcf of natural gas," said analysts in the Houston office of Raymond James & Associates Inc.

Before MMS officials began opening bids, Raymond James analysts said they expected "fierce" competition for deepwater tracts with bids "well in excess of last year."

Raymond James reported, "Recently, we have seen a dramatic increase in the total value of deepwater tracts auctioned, growing nearly 300% to $300 million in the past 2 years, though still well below the high-water mark of $500 million seen in the late 1990s. Additionally, operators have focused their attention on the deeper tracts, accounting for nearly 90% of total lease sales last year. The Gulf of Mexico remains at the top of the class in rate, term, and fleet size for deepwater floaters, as evidenced by the record number of deepwater rigs currently in the region (15)."

They said, "Lease Sale 204, along with additional lease sales in October and March, should provide additional catalysts to an already robust deepwater market, making deepwater drillers like Transocean Inc., GlobalSantaFe Corp., and Noble Energy Inc. even more attractive." Transocean and GlobalSantaFe agreed in July to a merger that will create a company valued at $53 billion.