Cumulative Bonus And Production Profiles With Time For Different Competitive Bidders: Federal Offshore Oil And Gas Leases
Authors: Dougherty Elmer L. , Bruckner Lawrence A. , Lohrenz John, 
Published: December 2007

We examine the cumulative profiles through time of the net leases and acreage won, bonus paid, and production obtained for the largest bidders for production obtained for the largest bidders for Federal offshore oil and gas bonus leases. All other variables equal, a bidder with more production revenue per dollar of bonus paid may be considered more per dollar of bonus paid may be considered more successful than bidders with less. The success of individual bidders shows a rather surprising variation which is apparently unrelated to whether the bidder tended to acquire higher or lower priced acreage.

Introduction

Through 1976, 2,882 Federal offshore oil and gas leases have been issued to the highest bonus bidder. Bonuses paid exceeded $18.1 billion on 13.7 million Acres, an average of $1,323 per acre. Through 1976, 548 of the leases issued have yielded production, the gross revenue from which has totaled $17.8 billion (including almost $3 billion of royalties paid to the Federal Government).

The purpose of this study was to quantify the performance of winning bidders for these Federal performance of winning bidders for these Federal offshore oil and gas leases. Section I presents aggregates of results achieved by different bidders. Section II presents time profiles of the outcomes enjoyed or suffered by these same bidders.

The results show, assuming a more successful bidder is one who obtains more production revenue for less bonus, wide variations in how successful bidders have been. Further, no consistent relation between the patterns of a bidder's bids and success is evident.

1. BIDDER PERFORMANCE AGGREGATED THROUGH TIME

We used information about mergers, acquisitions, and corporate ownership to make definitions of individual bidders considered as existing the end of 1976. A company having made an acquisition of another company was deemed to be the individual bidder who won the leases actually issued to the acquired company. A company reportedly holding more than a 25 per cent interest of another company was deemed to be the individual bidder on all leases issued to the latter. As these conventions used to define individual bidders are arbitrary, so are the definitions. Thus" we caution that these definitions of individual bidders are arbitrary made only for the purpose of this study.

For each individual bidder, the following six totals were computed:—net number of leases acquired—net acreage on these leases—net bonus paid for these leases—net liquid production through 1976 from these leases—net gas production through 1976 from these leases—bidder's share of gross production revenue through 1976 from these leases

All computations were made on the basis of stated ownership, whole or fractional, in the bid for which the lease was issued. Any assignment of ownership subsequent to bidding was not considered. Thirty individual bidders were found to possess more than one per cent of, at least, one of Ne six totals. These "Top 30" individual bidders are named on Table I in which the bidding and production performance of each is summarized. production performance of each is summarized. The "Top 30" acquired 91 per cent of the total acreage, paid 91 percent of the bonus, and received 97 per cent of the production revenue. Table 1 also shows the performance for the residual aggregation of all individual bidders not in the "Top 30".

The following ratios of sums for individual bidders are listed on Table 1:Bonus to acreageRevenue of acreageRevenue of bonus