March 20 (Bloomberg) -- BP Plc’s bids for its first new U.S. offshore leases in two years aren’t expected to add any barrels of production until the middle of the next decade.
The owner of the deep-water Macondo well that spewed millions of barrels of crude into the Gulf of Mexico during a 2010 blowout was the highest bidder on 24 blocks offered for lease by the Interior Department, Tommy Beaudreau, director of the Bureau of Ocean Energy Management, said in a conference call yesterday. The tracts are part of an area twice the size of Maine that attracted more than $1 billion in bids from oil and natural gas producers.
It was only last week that BP received the U.S. Environmental Protection Agency’s blessing to resume competing for federal drilling rights after the London-based company was barred from winning new leases in 2012 because of safety concerns. Although BP has regained credibility with regulators, investors won’t see any upside unless BP discovers oil and constructs platforms and pipelines to deliver it, a process that can take 10 years or more, said Chris Kettenmann, an analyst at Prime Executions Inc.
“Cosmetically, this looks good for BP,” Kettenmann, who lowered his rating on BP shares to neutral this week, said in a telephone interview from New York. “But it’s not a needle-mover. Getting from yesterday’s sale to exploration to development is a long road map, and it could be a decade before they see any production out of this.”
BP dropped as much as 6.7 pence, or 1.4 percent, to 470.3 pence in London. The stock traded at 471 pence at 9:51 a.m. London time.
BP’s 31 bids had a total value of $53.8 million; its 24 winning bids amounted to $41.6 million, bureau records showed. Fifty oil companies bid on 326 blocks offered, with winning bids in the auction totaling $851 million. High bids opened yesterday will be evaluated by government officials before the leases are formally awarded, Caryl Fagot, a bureau spokeswoman, said in an e-mailed statement.
“BP is very pleased at the prospect of adding to our leading leasehold position in this key U.S. offshore region,” Brett Clanton, a spokesman, said in an e-mailed statement.
BP, which counts on the U.S. section of the Gulf for one in every seven barrels of oil it produces worldwide, is still recovering from the aftershocks of the Macondo blowout that killed 11 rig workers, fouled the ocean for months, crippled exploration and so far has cost BP $28.5 billion for everything from skimming crude from seawater to testing seafood to bankrolling tourism advertisements.
The company’s Gulf crude output tumbled 62 percent since the year of the catastrophe to average 174,000 barrels a day in 2013, federal records showed. Even so, BP remains the second-largest oil producer in the region, outranking U.S.-based giants including Chevron Corp. and Exxon Mobil Corp. Only Royal Dutch Shell Plc produces more Gulf crude.
BP has long experience in turning speculative leases on wildcat prospects into lucrative oil bonanzas. BP’s Thunder Horse field, the largest known oil and gas accumulation in the Gulf, was discovered in 1999 and didn’t commence output until the middle of 2008.
BP failed to replace 60 percent of the oil and gas it pumped globally last year, the worst performance in at least 16 years, even as production tumbled by almost one-third, according to data compiled by Bloomberg.
Since the Macondo well erupted on the night of April 20, 2010, BP has lost 27 percent of its market value. During that period, the company’s biggest rivals in the Gulf -- Shell and Chevron -- have gained 8.2 percent and 42 percent, respectively.
The Environmental Protection Agency imposed a suspension in November 2012 that barred BP from lucrative government contracts and new drilling leases in the Gulf, after determining the company hadn’t fully corrected problems that preceded the 2010 disaster. An agreement to lift the ban was announced March 13.
In a sustainability report issued by BP yesterday, the company noted that a U.S.-appointed safety monitor began overseeing its offshore operations in the Gulf of Mexico last month and will continue for a period of up to four years.
The company last acquired 40 new leases in a June 2012 sale. The U.S. has held three offshore auctions since BP was barred from new contracts or leases.
Chief Executive Officer Bob Dudley said this month the Gulf is one of four “key regions” for the company’s growth.
To contact the editors responsible for this story: Susan Warren at firstname.lastname@example.org Will Kennedy, Tony Barrett