Lease sale Big Beautiful Gulf 3 (BBG3) will be held on 8/12/2026. The Final Notice of Sale is attached.
Given the rather tepid BBG1 and BBG2 results and the high sale frequency, robust bidding is not expected. Nonetheless, the BBG bidding patterns and tract evaluations have been interesting, most notably BOEM’s rejection of LLOG’s bid for Keathley Canyon 828, an expired lease block in the their Buckskin field.
Keathley Canyon 828 is not among the blocks listed for sale at BBG3. Per the Notice of Sale (p. 4), “any lease blocks whose high bids were rejected and not appealed in the immediately preceding Big Beautiful Gulf lease sale, are expected to be included as eligible for lease.” Can we therefore assume that either the KC 828 bid rejection or the prior lease expiration is being appealed?
The legislatively mandated BBG lease terms are attractive – 10 years and 12.5% royalty for deepwater blocks. A more recent legislative directive requires (wrongly in my opinion) the approval of downhole commingling requests. This accelerates the return on investments in deepwater, high pressure reservoirs. Such commingling has presumably contributed to record Gulf oil production in 2025. The longer term concern is the impact on ultimate oil and gas recovery.
Meanwhile, the Gulf rig count and well start numbers continue to disappoint. Baker Hughes (7/2/2026) lists only 4 active rigs in the deepwater Gulf – one each in the Alaminos and Mississippi Canyon areas and two in the Green Canyon Area. BSEE’s borehole file lists only 15 new deepwater exploratory well starts YTD.
Bud's Offshore Energy (BOE) 