Reconsidering the "bellwether" Gulf of Mexico lease sale flop

A top official in Obama's Interior Department has an interesting new essay arguing that last month's Gulf of Mexico lease sale wasn't really the flop that it seemed, despite the low bidding totals.

"The extent to which the lease sale was portrayed as a disappointment appears more a factor of the Administration’s amped-up rhetoric as opposed to anything surprising or negative about the actual results."

One level deeper: Lots of coverage (including pieces by Axios) focused on the small percentage of tracts receiving bids and the bidding totals that were vastly lower than many prior sales.

Yes, but: Beaudreau makes several points about the sale...

• The industry has just recently begun emerging from a low-price cycle that sapped capital investment.
• The industry has been "laser-focused" on cutting costs and is now more disciplined and less free-spending.
• It must be viewed in light of heightened competition from lower-cost areas with shorter development timelines, notably onshore shale.
• For all these reasons, industry has moved away from bidding speculatively, instead focusing on prospective areas near existing infrastructure.
• When those circumstances exist, companies still open their wallets in the Gulf — 9 blocs received bids higher than $2 million, and the highest single bid was over $7 million.