Central Gulf Sale hits record $3.67 billion

Dozens of blocks receive eight-figure bids

Central Gulf of Mexico Sale 206 broke both records and expectations March 19, raking in not only the largest total amount of high bids in the US' 54-year history of offshore auctions but capturing the biggest single bid in decades of Gulf sales.

The sale took in $3.67 billion in apparent high bids, besting the previous all-time peak total of $3.47 billion set in 1983 and also the $2.9 billion captured in last year's Central Sale 205, even though oil companies bid on fewer blocks than in 2007.

The audience and representatives of sale sponsor US Minerals Management Service broke into spontaneous laughter and applause after the sale's largest offer of $105 million, served up by Anadarko Petroleum, Murphy Oil and Samson Offshore for Green Canyon Block 432, was read.

"We were pleasantly surprised" at the amount, MMS director Randall Luthi said at a press conference following the sale.

Anadarko, jointly with Murphy Oil, also took honors for the highest offer in Eastern Sale 224, which took place immediately following Sale 206, with a high bid of $8 million for Lloyd Ridge Block 289. That sale, vastly smaller than Sale 206, took in just $64.7 million.

US Interior Secretary Dirk Kempthorne, who attended the sales and called out some of the bid amounts, said it was "a tremendous day for the US...it shows you the need is there" for more US-produced oil and natural gas.

Sale 206 was a record-breaker by any reckoning, even though the 1,057 bids across 615 tracts did not match the 1,428 bids on 723 tracts in 2007's Central Sale 205. But dozens of blocks received eight-figure bids in Sale 206; in fact, the lowest of the top-10 high bids was still a whopping $68.5 million, plunked down by Norway's Statoil.

"There were more bids this time between $50 million and $100 million; that's what pushed the bid total over last year's," Julie Wilson, lead analyst-Gulf of Mexico research for industry researchers Wood Mackenzie, told Platts after the sale.

Like many observers, Wilson pointed to the recent Chukchi offshore sale in Alaska last month as a preview of oil companies' thinking going into the auction. Chukchi also featured a bid of over $105 million and a high-bid total of $2.66 billion (ON 2/7).

Deepwater clearly dominated Sale 206, capturing all of the top 10-highest bids and accounting for the most fiercely contested blocks that coaxed six or more offers each; two deepwater tracts each received 10 bids. And deepwater operators that bid aggressively in last year's Central Sale got even more ferocious in Sale 206: newcomer Cobalt International, formed by ex-Unocal employees, was responsible for two of the sale's biggest bids of $85.4 million and $74.4 million for deep acreage in Green Canyon and Keathley Canyon respectively.

Likewise, Hess participated in four of the top-10 bids, taking honors with Marathon for the sale's second-highest bid of $93 million for Walker Ridge 226. A Marathon-Hess pairing was also behind the sale's seventh-largest bid of $73.4 million for Walker Ridge Block 269.

But the aging Continental was no slouch, either. Sale observers and MMS officials agreed there were more multimillion-dollar bids for shallow-water tracts than in recent sales, including last year. While just one Shelf block attracted five bids, MMS Associate Director for Offshore Chris Oynes said he counted 185 blocks in water depths of 200 meters or less that took in a total of $209 million in total high bids.

"Companies are starting to think about going after deep gas prospects in shallower water," Oynes said, noting that several companies such as McMoran Exploration have recently made a handful of discoveries in the past year at geologically deep levels, which is considered to be more than 15,000 feet.

Meanwhile, Eastern Sale 224 did not wow observers, but MMS appeared satisfied with its turnout. Just 118 blocks that have not been available in 20 years were featured, 36 of which received a total 58 bids. Just five companies led bids in the sale: Shell, BP, Anadarko, Italy's Eni and Australia's BHP Billiton.

Sale 224's income will be distributed starting next year to the Gulf states of Louisiana, Texas, Mississippi and Alabama. Those states will receive 37.5% of the monies, while the Land and Water Conservation Fund gets 12.5% and the federal governemnts receives the rest.

Among the sale attendees were four economists and engineers from Iraq's oil ministry, who Kempthorne said were observing the auction. "They wanted to see the precision by which MMS conducts these" sales, he said. "They wanted to observe the transparency."

Created: March 24, 2008

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