Oil and gas companies shelled out about $121 million in high bids for blocks in the U.S. Gulf of Mexico (GoM), mostly targeting the Lower Tertiary trend, in the country’s first gulf-wide lease sale since 1983.

The results, deemed a success by U.S. Bureau of Ocean Energy Management (BOEM) officials despite bringing in less than half that of the March 22 lease sale that covered less territory, showed offshore interest still remains. Lower commodity prices, which cut deep into profit potential, have prompted many to reduce spending and seek more efficient ways of generating value. For some GoM producers, this has meant maximizing use of existing infrastructure with use of subsea tiebacks.

Statistics from the Aug. 16 sale—Lease Sale 249—show that 27 companies participated and submitted 99 bids on 90 tracts. More than 84% of the blocks attracting bids were in water depths of 800 m (2,625 ft) or more. The last GoM lease sale, which only included blocks in the central GoM region, attracted 28 companies which submitted 189 bids on 163 blocks in March. High bids for the March lease sale was nearly $275 million.

“While the results of today’s Gulf of Mexico oil and gas lease sale reflect market realities, they also demonstrate the offshore oil and gas industry’s commitment to the U.S. Gulf of Mexico, even with extended low commodity prices and lingering regulatory dysfunction,” Randall Luthi, president of the National Ocean Industries Association, said in a statement following the sale.

Based on preliminary results released by BOEM, companies’ appetites for blocks in the Alaminos Canyon, East Breaks, Garden Banks, Keathley Canyon and Mississippi Canyon were the greatest, with each area receiving at least two bids. But it was Garden Banks 1003—located in a water depth between 800 m and 1,600 m (5,249 ft)—that fetched the most with Total E&P USA bidding $12.1 million.

Total E&P is currently working with Cobalt International in the Garden Banks area to develop the deepwater North Platte discovery. Total has a 40% working interest in North Platte, while Cobalt—the operator—holds the rest. Earlier this year, the North Platte #4 Sidetrack 2 hit about 122 m (400 ft) of high-quality Lower Wilcox oil pay and a subsequent bypass for core operation adjacent to the sidetrack led to the recovery of about 61 m (200 ft) of Lower Wilcox conventional core.

The discovery, which is adjacent to Garden Banks 1003, is being marketed.

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The second and third single highest bids came from ExxonMobil Corp., which pledged $10.8 million and $5.7 million for two Mississippi Canyon blocks. Both blocks have water depths of more than 1,600 m.

“It’s a continued show of the strength of deep water,” Mike Celata, director of BOEM’s GoM region, said during a media call following the sale. He pointed out that 76 of the 90 blocks receiving bids had water depths greater than 800 m. “It’s a continued investment in the gulf looking at the Lower Tertiary and Miocene trends.”

Wood Mackenzie analyst William Turner saw the results as a deepwater win.

“Deepwater (400+ meters depth) blocks won the day today, with 76 blocks receiving 98% of high bid value at $118 million. The deepwater industry is emphasizing short-cycle, low-risk prospects above high-impact, wildcat drilling,” Turner said. “Today we saw operators continue to focus on areas near existing infrastructure with a majority of bids close to existing hubs or appraised developments.”

Besides North Platte, bids made were also near Chevron’s Guadalupe development in Keathley Canyon. At about $27.9 million, Chevron topped the leaderboard in the sum of high bids submitted.

“Bids from Chevron, Shell and Total near pre-FID discoveries, Guadalupe and North Platte, were a vote of confidence in higher-risk, standalone developments with potential for higher rewards,” Turner added.

The Aug. 16 lease sale marked the first offshore sale under the new Outer Continental Shelf Oil and Gas Leasing Program for 2017-2022, which was approved during the Obama administration, and the first under the Trump administration.

During the next 90 days, bids submitted will be evaluated for fair market value and awards will be posted as they are completed on BOEM’s website. The gulf-wide sale offered about 13,725 blocks ranging from three to 230 miles offshore in the GoM’s western, central and eastern planning areas in water depths ranging from three to more than 3,400 m (nine to more than 11,115 ft).

“I characterize this as a very successful sale. We made $121 million, and last August for Lease Sale 248 we made $18 million,” Katharine MacGregor, assistant secretary for Lands and Minerals Management, said during the media call. “There is something to be said about having a gulf-wide sale that offers more acreage for competitive leasing.”

Lease Sale 248 offered blocks in the western GoM—an area that traditionally sees fewer blocks on offer and generates fewer bids compared to central GoM lease sales.

MacGregor later referred to the March sale, saying “Coming right on the heels of a central gulf sale, there’s a lot to be said for companies accumulating capital to bid again on area-wide leasing. … It proves opening more acreage gives folks a lot more options when it comes to investing in offshore leases.”

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Velda Addison can be reached at vaddison@hartenergy.com.