Sharp drop in bids for 153 federally owned drilling tracts in western Gulf of Mexico

Aug 26, 1999 02:00 AM

A sharp drop in bids for leases for offshore petroleum sites off the coast of Texas was due to consolidation of some major energy companies as well as a move toward developing leases sold over the past few years, analysts said.
Energy companies made a total of $ 94.6 mm in high bids for 153 federally owned drilling tracts in the western Gulf of Mexico, which also includes a portion of off-coast Louisiana, down from $ 553.4 mm for 402 tracts last year. Only 18 of the tracts received more than one bid. There were 177 bids, down from 486 at last summer's sale.

The sale followed a pattern set at a March sale of leases to drill in the central Gulf, when the number of bids dropped to 273 from 1,188 in 1998. Although wavering oil prices were a factor, many companies have a full inventory of lease sites and are moving more towards exploration and production, rather than obtaining more leases, analysts said.
That is particularly true among the major companies that have merged, which are now re-evaluating their joint holdings, said Paul Kelly, senior vice president of Rowan Cos. Inc., an oil service company. In the meantime, the sale saw more participation by smaller independents trying to take advantage of the low interest in the sale, Kelly said. "They are busy doing other things," Kelly said of the major companies.
"It gave independents a unique opportunity." Paul Rosenbusch, director of the U.S. Minerals Management Service, which manages federal offshore leases, said one more year remains on a federal royalty relief law passed by Congress in the mid-1990s that gives breaks for deepwater production. After that, the MMS has the authority to continue the program with congressional action.
"I'm looking forward to a robust industry in the Gulf of Mexico," he said. The highest bid for a tract was $ 11.3 mm by the Kerr-McGee Oil & Gas Corp. The tract is located about 250 miles south-east of Galveston. Kerr-McGee also had the largest total of high bids with $ 33.2 mm for 36 tracts, far ahead of second-place Coastal Oil & Gas USA with $ 4.5 mm for 18 tracts.

Source: AP via Newspage
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