Gulf of Mexico Auction Amid Slumping Oil Prices

Gulf of Mexico Auction Amid Slumping Oil PricesGulf of Mexico Auction Amid Slumping Oil Prices

Nearly three dozen companies were vying for drilling rights in the Gulf of Mexico on Wednesday in a government auction of offshore oil and gas leases that could be tempered by falling crude prices. On Wednesday, 195 sealed bids for 169 separate central Gulf tracts were set to be opened when the Bureau of Ocean Energy Management kicks off the auction Wednesday in a meeting room inside New Orleans’ Mercedes-Benz Superdome.

While the monetary amounts won’t be disclosed until the sale is underway, the number of companies that participated —35, down from 50 a year ago and 56 in a similar March 2013 auction — suggests lower oil prices may be dampening enthusiasm (and available cash) for the offshore acreage.

The decline in participating companies also may reflect mergers among firms active on the shallow continental shelf and the concentration of well-capitalized companies focusing on the deep-water frontier. Bureau director Abigail Hopper, who presided over the auction Wednesday, said the agency expects “a great deal of industry interest.”

She acknowledged that low oil prices are a backdrop for the bidding. “We’re interested to see how current oil prices affect the sale,” Hopper said. “There could be a small depression in the activity.” Technically, the bureau allowed bids on tracts spanning 41.2 million acres in the central Gulf of Mexico, off the coasts of Louisiana, Mississippi and Alabama. Historically, about 20 to 25 percent of newly available blocks in central Gulf lease sales have received bids, according to ocean energy bureau data.

Most of the submitted bids target territory in deep water, with 100 of the 169 tracts receiving bids in 800 or more meters of water.

During the last central Gulf sale, in March 2014, 50 companies filed bids worth $1.1 billion — including $850.8 million in winning offers.