Raymond James "Energy Stat of the Week"
Posted: Tue Jun 01, 2010 8:59 am
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.
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.