The Biden administration finished 2023 with Gulf of Mexico Lease Sale 261 bringing in a total of $382 million in high bids. The total was not just a 45% increase from the last sale, held March 2023, but the largest since 2015.
Even with such robust results, however, the 26 participating companies only bid on a small fraction of the resources on offer: 311 tracts out of more than 13,000, covering 1.7 million acres out of 72.7 million. Anadarko Petroleum Corp.’s bids—in excess of $100 million—made up more than 25% of the total.
Companies especially went after deepwater blocks south of Louisiana in Green Canyon and Mississippi Canyon, with more than 75% of the areas bid on located in water depths greater than 800 m (2,625 ft).
The sale included 6 million acres a federal appellate court ruled must be included without the “11th hour” restrictions the administration added regarding ship speeds. This acreage had initially been withdrawn in an effort to protect Rice’s whale habitats.
No additional sales are planned until 2025. This likely played into the results of Lease Sale 261 and was also seized upon by industry trade groups worried about both the potential for investment to shift overseas and a lack of sufficient lease inventory to allow for continued development of domestic resources.
“In our forward-thinking industry, securing new lease blocks is vital for exploring and developing resources crucial to the US economy,” said Erik Milito, president of the National Ocean Industries Association. Despite such pronouncements, however, a large majority of existing US Gulf of Mexico leases, spread across more than 12 million acres, remains undeveloped.
A strong foundation
Results were announced against the backdrop of news that the US was heading into 2024 producing more oil than any country in history: 13.3 million b/d of crude and condensate and another 8.1 million b/d of NGL and biofuels; both records, each of which is expected to be topped in 2024.
“When you look back on 2008—when US production was at a 62-year low, and exports were zero—it is a remarkable turnaround,” said Jim Burkhard, vice-president and head of research for oil markets, energy and mobility, S&P Global Commodity Insights. The company expects global liquids supply growth of 2.7 million b/d this year, compared with demand growth of 1.6 million b/d.
Third-quarter 2023 earnings and revenues were a victim of the industry’s own success, attributed primarily to lower oil and gas prices as supply continued to outpace demand despite the efforts of the Organization of Petroleum Exporting Countries and its cohorts (OPEC+). Brent prices a year ago third-quarter averaged more than $100/bbl, compared with $86.70 in third-quarter 2023. West Texas Intermediate prices were also much lower, as US production climbed by more than 1 million b/d year-on-year.
Softer prices, paired with geopolitical uncertainty, also took their toll on capital expenditure plans. Fewer than one in three respondents to Federal Reserve Bank of Dallas’s latest Energy Survey said they intend to spend more on new projects in 2024, versus half of all respondents the previous quarter. Only 5% of large-company leaders named growing production as their top 2024 goal versus 41% of small-firm executives.
Just about everybody, however, seems to be predicting an active year in oil and gas mergers and acquisitions (M&A) in 2024, with a continued focus on consolidation. Large cash reserves on the part of both operators and buyout firms and expected easier financing terms will also help M&A activity. Thirty-five percent of large-company leaders named acquiring assets as their number one goal for 2024.
The oil and gas industry’s recent record speaks for itself, and it enters 2024 with not just a clean bill of health but with multiple layers of opportunity (traditional extraction and processing, growth through acquisition, expansion into new endeavors, etc.) for continued prosperity. Oil & Gas Journal looks forward to covering it all.