Bud's Offshore Energy (BOE)

BOEM published their Sale 257 Decision Matrix on Friday (2/24/2023), and my previous speculation regarding the rejected Sale 257 high bid has proven to be partially incorrect. The rejected high bid was submitted by BP and Talos and was for Green Canyon Block 777. BOEM’s analytics assigned a Mean of the Range-of-Value (MROV) of $4.4 million to that tract, which tied for the highest MROV for any tract receiving a bid. The BP/Talos bid was $1.8 million or just 40% of BOEM’s MROV. BOEM’s tract evaluation is interesting given that the other bid on this wildcat tract (by Chevron, $1.185 million) was considerably lower than the rejected BP/Talos bid.

The Sale 257 bid that I thought might have been rejected was for lease G37261. This lease was never issued per the lease inquiry data base and the final bid recap. BHP’s bid of $3.6 million for that tract (Green Canyon Block 79) was more than 5 times BOEM’s MROV of $576,000, and was accepted per the decision matrix. Why was the lease never issued?

Both Green Canyon 79 and 777 should again be for sale in legislatively mandated Sale 259, which will be held in just a few weeks on March 29, 2023, just 2 days prior to the deadline. It will be interesting to see what the bidding on those tracts looks like.

Meanwhile, Exxon and BOEM are still mum about the 94 Sale 257 oil and gas leases that Exxon acquired for carbon sequestration purposes. Note the large patches of blue just offshore Texas on the map above. These leases were all valued by BOEM at only $144,000 each, which is equivalent to the minimum bid of $25/acre. This valuation reflects the absence of perceived value for oil and gas production purposes. Exxon bid $158,400 for each tract, $27.50/acre or 10% higher than the minimum bid. Given that (1) the Notice of Sale only provided for lease acquisition for oil and gas exploration and production purposes, and (2) it was common knowledge that these tracts were acquired for carbon sequestration, should these bids have been rejected?