Eight-figure bids seen in US Gulf of Mexico sale despite low oil prices
By Starr Spencer
March 20, 2015 - Oil companies continued to chase select acreage for pricey sums in Central Gulf of Mexico on March 18 despite low oil prices, even though the total amounts captured in the lease sale were far less than in recent years.
Lease Sale 235 generated nearly $539 million in total high bids and $583 million in all offers placed -- the lowest such amounts in a decade and a shadow of the nearly $851 million bid in last year's Central Gulf sale.
The largest bid of the sale was $52 million for Walker Ridge block 107, which appeared to be in the deepwater Lower Tertiary play where sizeable discoveries have been made in recent years. Two smaller producers made the offer -- Red Willow Offshore and Houston Energy. Neither could be reached the day of the sale for comment.
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But the most-discussed offers also were the second- and third-highest bids of the sale: two blocks a handful of miles northwest of the Chevron-operated Anchor discovery at Green Canyon block 807. Chevron and privately held Venari Resources jointly were apparent high bidders on GC 760 and 761 with respective offers of $41 million and $43 million.
In unveiling Anchor in January, Chevron described the oil-prone find as "significant." It should be appraised later this year, Chevron spokesman Cameron Van Ast said.
Abigail Ross Hopper, director of US Bureau of Ocean Energy Management said the bid totals are "what we expected given that oil prices are lower than they have been in the last six years."
Oil prices have fallen to less than half their mid-2014 peaks of over $100/barrel, while upstream companies have reined in their spending by roughly 20%-40% this year, causing widespread reductions in drilling activity.
While oil companies claim to take a long-term view of the US Gulf deepwater and do not base decisions on short-term commodity prices, analysts believe low prices may cause a shift away from exploration to largely appraisal and development activity this year.
"Given companies' revenues and their plans for the future, they are making different decisions than they would awhile ago," Hopper, who assumed her post in January, said.
Next: Newly-available blocks may have aided highest bidding