The Deepwater Rig Exodus Accelerates

This comes to us from Reuters…

SAN FRANCISCO, Jan 27 (Reuters) – Noble Corp (NE.N), the world’s second-largest offshore rig contractor, is moving one of its deepwater rigs out of the Gulf of Mexico, and said it expected more would follow.

Noble has a letter of intent with Royal Dutch Shell Plc (RDSa.L) to move the Clyde Boudreaux to Brazil for a year at a rate of $290,000 per day, starting in April, according to Roger Hunt, Noble’s senior vice president for marketing and contracts.

“We expect to see additional units leave the Gulf region, which may at some point impact the broader deepwater market,” Hunt told analysts on a conference call on Thursday. “However, the global deepwater segment has so far continued to be relatively stable.”

Relatively stable, that is. Meaning most thought all 35 deepwater rigs would have been gone by now. And most of them haven’t left.


This snippet should delight and titillate…

The Boudreaux had been on a standby contract with Noble Energy Inc (NBL.N), an operator unaffiliated to Noble Corp that opted not to extend its contract.

The rig had been due to earn a dayrate of $397,500 with Noble Energy once it started working again.

Noble shares fell 1.5 percent on Thursday to $37.30, despite reporting better-than-expected profits.

Dahlman & Rose’s Omar Nokta called the Boudreaux’s new rate “much weaker than expected,” with dayrates for such units ranging from $350,000 to $400,000.

Clearly we wanted it out of the Gulf of Mexico,” Noble Chief Executive David Williams said when asked about the rate.

Prior to yesterday’s announcement, Reuters also had this synopsis of what’s already been lost…

* Diamond Offshore Drilling Inc (DO.N: Quote) said on July 9 that the Ocean Endeavor, contracted to earn about $290,000 per day from Devon Energy Corp (DVN.N: Quote) in the Gulf of Mexico, would move to Egypt under a new deal with Burullus Gas Co.

* Diamond said on July 12 it would move the Ocean Confidence, under contract to Murphy Oil Corp (MUR.N: Quote), from the Gulf to the Republic of Congo.  The rig is now drilling wells for Cobalt International Energy Inc (CIE.N: Quote) off Angola, but is due to return to U.S. waters in October.

* Transocean (RIGN.VX: Quote)(RIG.N: Quote), the world’s largest offshore drilling contractor, said on Sept. 1 that it had moved its Marianas rig, under contract to Italy’s Eni (ENI.MI: Quote), from the Gulf to work in Nigeria.

* Transocean said on Sept. 14 that its Discoverer Americas vessel, under contract to Norway’s Statoil (STL.OL: Quote), was leaving for Egypt and was due back in the Gulf in March.

* Ensco Plc (ESV.N: Quote) said on Dec. 1 that its newly built 8503 rig, under contracted with Cobalt, would work for Tullow Oil Plc (TLW.L:Quote) off French Guiana for three months.

* Pride International Inc’s (PDE.N: Quote) newly built Deep Ocean Ascension, under contract with BP, is moving to the Mediterranean Sea from the Gulf of Mexico in the first quarter, according to the latest Pride fleet update.

So yesterday’s announcement makes seven. We’ve lost 20 percent of the deepwater rigs in the Gulf since Deepwater Horizon. No deepwater permits have been issued since the accident, eight months ago. When one of these rigs leaves, we’re out a good 1,250 jobs in Louisiana. Seven rigs gone means at least 8,750 jobs up in smoke.

Remember – the moratorium was supposed to be a six-month deal. It’s now an eight-month deal.

And if you think this thing won’t continue, Reuters continues…

The Jim Day is another Noble ultra-deepwater rig out of work in the Gulf after Marathon Oil Corp (MRO.N) canceled its four-year, $752 million contract this month.

The recently rebuilt Jim Day was drawing plenty of interest among operators, both in the Gulf and elsewhere, Hunt said.

Another Noble floating rig that works in shallower depths, the Paul Romano, will be available later this year, and Hunt was looking at opportunities for it, mostly outside the Gulf.

When these rigs leave, they don’t come back right away. They sign contracts to drill in these other locations, and those contracts can be 3-to-5 year contracts. When oil goes up to $150 a barrel or more this summer, and it will, and everybody is paying $4 or even $5 at the pump, and we will, lots of folks will demand increased oil production. And by then, if this energy self-immolation hasn’t been reversed, we’ll look at the 15, 20, 25 rigs which used to be in the Gulf and are now in Brazil or Indonesia or China or wherever and say “Why did we give up our domestic oil production capacity?”

Because while it might be tremendously profitable to drill in the deepwater Gulf, it’ll just be too much trouble to bother.

Stupid. Just stupid.

UPDATE: Via Hot Air, this is a quote worth passing along:

We have not been able to get any drilling permits. None have been issued for Deep Water. There have been a few in the shallow water. Individual companies and associations like the API (American Petroleum Institute) continually engage with the regulator, The Bureau of Ocean Energy Management and try to get clarity on what they will require to approve these permits. This has been going on for some time but it has intensified since the lifting of the moratorium in October.

Since the initial moratorium in May, we have had three deep water drill ships that were all long term contracts- go idle.



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