A company's performance in a lease sale can have serious implications for future growth and sustained value. Therefore it makes sense to approach each sale armed with the most powerful tools available. Surprisingly few firms go beyond spreadsheet analysis when it comes to such an important event, most likely because it is the most familiar method. Perhaps this is why we see bid levels with a significant amount of spread, representing "money left on the table" or skewed perspectives on the value of the block.

Firms that wish to move to the next level take a different view. They choose to engage their best talent in a simulation of lease sales – mythical auctions that are run thousands of times – the collective output yielding insights into the best bid strategies at appropriate levels of risk. While simulation represents the science – setting a bid strategy based upon simulation represents the art. It has been our experience that the top performers in lease sales get the balance of these two dimensions just right.

Building a bid strategy capability using simulation as a centerpiece is challenging, complex work, requiring key data sets and a mastery of the underlying technology simultaneously. That does not mean that best in class bid strategy is not attainable – it comes about with a focus on execution.

We will touch on many of the lessons we learned in working side by side with an aggressive lease sale bidder, and their journey from unsatisfactory auction performance to a place among the top tier of bidders:

  1. Use the talent you already have, but provide the team with an analytical system to translate knowledge into bidder intelligence.

  2. Build a serious blueprint of the bidding system before implementation

  3. Use the simulations to "steer" the bid strategy

We will focus on the practical, actionable steps to build a better bid strategy through analytics, sustainable across a range of lease sales, both in the US and abroad. As of this writing, Mexico had recently announced plans to conduct auctions on offshore license blocks starting in 2015, and the US BOEM announced a major lease sale each in the Central and Eastern GoM regions scheduled for March 2014.

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