INTEREST IN ULTRADEEPWATER TRACTS LAGS IN GULF OF MEXICO SALE 125

A.D. Koen
Gulf Coast News Editor

Declining interest in ultradeepwater prospects marked the eighth areawide western Gulf of Mexico federal lease sale in New Orleans last week.

In overall bidding terms, Outer Continental Shelf Sale 125 also fell well short of western gulf Sale 122 in August 1989. Companies exposed a total of $240,912,246 in Sale 125. Apparent high bids totaled $162,442,246.

In Sale 122, companies exposed $382,977,309 and had apparent high bids totaling $263,753,883.

Several major companies continued to position themselves in the gulf's deepwater plays. However, most of the 71 companies bidding in the sale focused on nearshore prospects close to existing production.

Industry offered 464 bids for 307 tracts off Texas in Sale 125. In Sale 122, companies offered a record 676 bids for 488 tracts, 475 of which were accepted (OGJ, Aug. 28, p. 22).

Sale 122 bidding was skewed by an aggressive performance by Shell Offshore Inc. Shell won 200 of its 212 bids, 167 of which were in deep water, in last year's western gulf sale. Last week, Shell bid on 19 tracts.

This year Texaco Inc. led all bidders in number of offers, BP Exploration Co. led in number of apparent high bids, and Enron Oil & Gas Co. led in terms of total money exposed (see table).

Matagorda Island Block 617 received the highest number of bids, with 11 bids totalling an exposure of $14,116,985. Diamond Shamrock Offshore Partners Ltd. was apparent high bidder on Block 617 with an offer of $2,885,760, topping three other bids greater than $2 million.

AGGRESSIVE BIDDING

Texaco adopted a more aggressive strategy in last week's sale compared with its Sale 122 performance.

Texaco and partners exposed in all $12,666,913 in Sale 125, with a net exposure to Texaco of $10.8 million. The company had partners on 11 of 33 bids.

In 1989, Texaco's gross exposure was $4 million, its net exposure $2.8 million. It was high bidder on 18 of 23 offers last year.

John Dombrowski, Texaco area exploration manager for the western gulf, said the corn an concentrated on strengthening its position in water depths shallower than 600 ft, especially where potential exists for new production technologies.

"In mature areas like the western gulf, companies need to be considering new concepts and technologies,"

Dombrowski said. "It's becoming more difficult to find quality prospects."

Although the western gulf traditionally is considered a gas province, High Island South and East areas have oil potential, he said.

OTHER STRATEGIES

ARCO also concentrated on nearshore tracts, filling out existing leasehold positions based on information from previous drilling.

However, John Beitzel, ARCO vice-president for eastern exploration operations, said only a few major companies bid for nearshore tracts.

While independent companies concentrated on nearshore acreage, the sale's most active majors sought tracts in deep water, he said. "Once again, it was like two separate sales."

ARCO bid on tracts in the north central High Island area with the idea of extending an existing play. The company was apparent high bidder on Matagorda Blocks 565 and 592, which Beitzel said also were step-out plays.

ARCO looked for new opportunities in Upper and Middle Miocene prospects with bids for Galveston and Brazos area tracts, Beitzel said.

Chevron Corp. emphasized deepwater exploratory prospects.

Bill Hazlett, economic evaluation supervisor for Chevron eastern exploration, said the company has tried to reorder its exploration goals.

"In past lease sales, we bid on a lot of prospects out of context, without considering synergies of adjacent developed properties," Hazlett said.

In Sale 125, he said, Chevron focused on areas where it anticipates significant oil potential.

The company was apparent high bidder on all 19 Garden Banks blocks on which it made offers. Water depths underlying those tracts range 500-2,700 ft, Hazlett said. He said Chevron's success with deepwater bids indicated the relative lack of interest in the sale.

Chevron also bid on four tracts in shallow waters to consolidate lease positions where it is drilling or plans wells.

ULTRADEEPWATER INTEREST LAGS

Noticeably absent from Sale 125 was the keen interest in the ultradeepwater prospects that dominated last year's sale. Competition was heavy for prospects in shallower water.

Galveston led all areas with 90 bids received on 49 tracts. North Padre Island received 43 bids on 22 tracts, and High Island 45 bids for 28 tracts.

At Sale 122, the average water depth represented in Shell's high bids was 3,900 ft, and 45% of all bids offered were in water deeper than 1,500 ft. Garden Banks with 152 bids and Keathley Canyon with 67 bids led the way in ultradeepwater bidding in Sale 122.

Along with Chevron, BP was apparent high bidder on all its offers for deepwater tracts in Sale 125.

Sale 125 competition was light in the Garden Banks area, where 48 bids were offered for 46 tracts.

BP was the lone bidder in Keathley Canyon, with three offers on three of the tracts. Only two offers were made on blocks in Alaminos Canyon.