Bidding down but sums higher in US Gulf of Mexico Lease Sale 251

On Wednesday, 15 August 2018, the United States held its region-wide Gulf of Mexico Lease Sale 251, drawing 171 bids from 29 participating companies, with high bids totalling US$178.1 million, an increase of about $53 million (43%) from the last region wide lease sale in March.

Commenting on the results of this latest round, William Turner, senior research analyst at Wood Mackenzie, said: "With a decrease in acreage from March and the prospect of lower royalty payments for deepwater acreage off the table, expectations were muted going into this lease sale.

"However, with an increase in competitive bids and dollar amount from the last round, companies demonstrated their continued confidence in the region. Increased competition centring around more selective blocks close to infrastructure tells us that capital is returning to the Gulf of Mexico."

Roughly 40% of blocks this round made a return from lease sales in 2007 and 2008, including a sizable portion of blocks towards the east picked up by ExxonMobil, previously held by Shell. Shelf bidding decreased this round but was still stronger than recent low rounds.

"The biggest surprise came from Hess with the highest bid of the round," notes Mr Turner. "It bid $25.9 million on a block in the heart of the Mississippi Canyon near BP's Na Kika offshore platform. Surprising as it is also near the Silvergate prospect, a dry hole."

"Meanwhile, Equinor and Exxon, among others, demonstrated an increased appetite for risk with bids on remote blocks," he added. "This reflects the steady increase in oil price and competitive ROI now due to much more efficient practices in the Gulf of Mexico."