6/1/2010
Conclusion: Consequences of Deepwater Horizon Continue to Grow
Everyone wants to know what the investment ramifications will be from the BP oil spill. So do we! But, the reality is that this is an evolving situation and the long-term implications remain largely unknown. In the short term, the recently announced six-month moratorium on deepwater drilling will have significant effects on the entire industry. For offshore drillers in particular, existing contracts could now be in jeopardy, and deepwater rigs may have to migrate internationally to secure work could further pressure deepwater dayrates. Longer-term, the deepwater market clearly has more risk as Gulf of Mexico represents ~15% of global floater activity and 25% of global deep/ultra-deep activity, and costs in the region could rise significantly. However, with the OSX down over 20% since the accident (offshore drillers down 30%), one has to wonder to what extent the market has priced in a Gulf of Mexico drilling slowdown.
Raymond James "Energy Stat of the Week"
Raymond James "Energy Stat of the Week"
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Raymond James "Energy Stat of the Week"
From the Raymond James “Energy Stat of the Week,” as published on 06/07/10.
Note that Sweet 16 member FX Energy is developing Polish gas.
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If you've been reading our energy research for the past three years, you are undoubtedly familiar with the U.S. natural gas story: Major technological improvements in horizontal drilling and hydraulic fracturing have led to an explosion in onshore gas production, largely coming from shale reservoirs that had previously been uneconomical. According to the Energy Information Administration (EIA), shales contributed 2.4 Tcf (9.1 Bcf/d) to U.S. gas supply in 2009 - nearly 15% of the total, up ~10x since 2000. A defining characteristic of this shale gas boom is that it's an almost entirely North American phenomenon. But what about Europe? As by far the world's largest gas-importing region, Europe would seem to be a natural candidate for shale gas development, particularly considering the fact that around 40% of Europe's gas imports (equating to ~25% of its total gas needs) come from Russia, a country with a history of using energy as a political weapon. In this Stat, we explore whether North America's success with shale gas can realistically be replicated in European countries, and which companies are positioned to capitalize on this trend. The bottom line: The resource potential is definitely there (gas-in-place estimates start at 550 Tcf), but don't hold your breath: This process will be a marathon, not a sprint.
Note that Sweet 16 member FX Energy is developing Polish gas.
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If you've been reading our energy research for the past three years, you are undoubtedly familiar with the U.S. natural gas story: Major technological improvements in horizontal drilling and hydraulic fracturing have led to an explosion in onshore gas production, largely coming from shale reservoirs that had previously been uneconomical. According to the Energy Information Administration (EIA), shales contributed 2.4 Tcf (9.1 Bcf/d) to U.S. gas supply in 2009 - nearly 15% of the total, up ~10x since 2000. A defining characteristic of this shale gas boom is that it's an almost entirely North American phenomenon. But what about Europe? As by far the world's largest gas-importing region, Europe would seem to be a natural candidate for shale gas development, particularly considering the fact that around 40% of Europe's gas imports (equating to ~25% of its total gas needs) come from Russia, a country with a history of using energy as a political weapon. In this Stat, we explore whether North America's success with shale gas can realistically be replicated in European countries, and which companies are positioned to capitalize on this trend. The bottom line: The resource potential is definitely there (gas-in-place estimates start at 550 Tcf), but don't hold your breath: This process will be a marathon, not a sprint.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group