Gulf of Mexico Lease Sale Attracts $171 Million in High Bids

The U.S. Department of the Interior's Minerals Management Service (MMS), in New Orleans, held a sale of offshore oil and natural gas leases in the Central Gulf of Mexico attracting $171.8 million in high bids from 67 companies. Sale 172 is the seventh lease sale held subject to the provisions of the Deep Water Royalty Relief Act, passed in 1995. The MMS received 272 bids on 207 offshore tracts. 3,806 tracts comprising approximately 20,368,385 million acres offshore Alabama, Louisiana, and Mississippi were offered. The total of all bids was $199.6 million. The highest bid received was $16.6 million, submitted by Marathon Oil Company and Kerr-McGee Oil and Gas Corporation for Walker Ridge, Block 121. Approximately 43 percent of the tracts receiving bids are in ultra deepwater (more than 2,624 ft.). The deepest tract bid on was in 8,740 ft. of water. "The results of this sale and the relatively low number of bids we received are consistent with our expectations, said MMS Acting Director Tom Kitsos. "This is an accurate reflection of today's low oil prices and an indicator that companies are still interested in prospects in the Gulf, yet they are being judicious about adding to their existing inventory of leases." The high bid on a block (approximately nine square miles) will go through an evaluation process to ensure the public receives fair market value before a lease is awarded. In particular, Spirit Energy 76, Unocal Corporation's U.S. Lower 48 exploration and production unit, said it is the apparent high bidder for interests in two Gulf of Mexico deepwater and five shelf blocks in the Lease Sale. Spirit was the apparent high bidder on two out of three deepwater tracts, and on five of seven shelf blocks. The company exposed a net total of $11.8 million, with apparent high bids amounting to $10.8 million. The company said it intends to exercise back-in rights to participate in Mississippi Canyon block 897, immediately to the north of the Mirage discovery announced earlier by Spirit Energy 76 and Vastar Resources, Inc. Prior to the sale, Spirit Energy had an exploratory portfolio of 292 blocks. The sale and back-in option will bring Spirit's Gulf of Mexico exploratory portfolio to a total of 300 blocks, if all bids are approved by the MMS. Of that total, 216 are located in deepwater; 84 are on the shelf. In the Gulf of Mexico this year, Spirit expects to drill four to six exploration wells on deepwater prospects, along with another 30 prospects on the shelf.