Dollars Keep Flowing to the Deepwater

For those wondering about Big Oil's commitment to domestic exploration, lease sales in the Gulf of Mexico are a useful gauge. The results of this week's bidding round demonstrate that the majors are definitely sticking around.

Last year, StatoilHydro (NYSE: STO) was the big bidder, and the firm concentrated its firepower on a relatively small number of offshore blocks. This time around, Chevron (NYSE: CVX) took a similar tack with its tracts, spreading $127 million among just 20 high bids. ExxonMobil (NYSE: XOM), meanwhile, bid an equal chunk of change that covered more than six times as many blocks.

Contrary to what you might think, ExxonMobil has a minor presence in the Gulf. The company's arrival may say just as much about the diminishing attractiveness of operating abroad than it does about the upside potential of these 130 blocks.

After the three aforementioned firms, LLOG and Royal Dutch Shell (NYSE: RDS-A) (NYSE: RDS-B) rounded out the top five bidders in dollar terms. In terms of number of apparently successful bids, Hess (NYSE: HES) ranked second, while Chevron and Devon Energy (NYSE: DVN) tied for third. Recall that we saw Hess make a huge splash in March's Central Gulf bash. This company remains a top candidate for exploratory upside over the next year or two, in my view. As for Devon, it goes to eleven.

As I argued when covering yet another lease sale last October, the deepwater dance marathon still has legs. Only when the bidders start staying home is it time to think about abandoning this powerful investing theme.