BP Is Back in the Gulf of Mexico Drilling Game With Auction Success
Analysts deem the Environment Protection Agency settlement an important milestone in BP’s (NYSE:BP) nearly four-year long mission to recover from the 2010 Deepwater Horizon oil spill. That disaster prompted a five-month drilling moratorium and bolstered safety requirements, which together led to an exodus of rigs and drilling equipment. In fact, production collapsed after the 2010 oil spill. But large oil companies have begun drilling again, and now even BP can bid on new contracts. Last week, BP and the EPA reached an agreement to lift a 2012 ban that was implemented following the spill and prevented the company from drilling in the Gulf of Mexico, where it was once one of the most aggressive oil producers. The company has since wasted no time in getting involved in bidding.
In an auction held Wednesday in New Orleans, just days after the ban was lifted, the oil producer was the highest bidder on twenty-four exploration blocks in the Gulf of Mexico worth nearly $42 million, according to records from the Department of the Interior. “BP is very pleased at the prospect of adding to our leading leasehold position in this key U.S. offshore region,” BP’s Houston-based spokesman Brett Clanton told The New York Times. Being able to drill in the gulf is a positive for BP because, before the spill, the company had invested heavily in oil and gas fields in the region, as well as the advanced computers and technology required to discover oil deep below the ocean floor.
“They have been in the penalty box,” Oppenheimer & Company analyst Fadel Gheit told the Times. “They have been working hard to lift the sanctions, and they immediately turned that into something positive,” he added, referring to the Wednesday auction.
In the years since an undersea well exploded fifty miles off the Louisiana coast, killing eleven workers and spewing millions of barrels of crude oil into the ocean, other companies have surpassed BP’s gulf output. The company has been drilling on its old leases and even made a significant discovery, but its production has plunged to 190,000 barrels a day — less than half what it was producing before the spill — thanks to the drilling ban and the fact approximately $43 billion in oil fields were sold to pay damages.