A number of offshore operatorS and drilling contractors are pausing their campaigns to assess the impact of falling oil prices, and to addressing staffing issues related to concerns about the growing coronavirus pandemic.
Since the week of March 9, more than one-third of the companies covered by Wood Mackenzie have cut their capex by 30%. Further cuts will be needed if low prices continue, the consultant says.
“Balancing the books at $30/bbl in 2020 is possible for many companies. But tough decisions would be required,” says analyst Roy Martin. “Over $75 billion in 2020 discretionary E&D capex and $80 billion of shareholder distributions [could] be cut – breaking a few promises to investors.”
Evercore ISI recently reported on Maersk Drilling’s reactions to market changes. With regard to the pandemic, Maersk is working through various day-to-day logistics and other challenges on its drilling rigs. Government guidelines are changing quickly, but the company benefits from a high degree of local content and quickly established various barriers on its rigs to reduce risk. For example, Maersk extensively reviews crew movements, and has implemented fewer rotations to reduce the risk of infection. The company had a few suspected cases but none were positive.
With the collapse in the oil price, operators are taking a deep breath, reviewing their portfolios, and re-prioritizing their projects in the new oil price paradigm. It is still early days, Maersk officials say that they expect their customers to put some opportunities on hold, to reduce costs. A few select projects that have progressed far may still be possible, but more and more projects are likely to be put on hold as the standoff drags on.
By mid-March, operators were already putting on the brakes in a number of regions throughout the world.
Shelf Drilling said that a contract for the jackup Shelf Drilling Tenacious will terminate early in September, 16 months ahead of the originally scheduled date, under a mutually agreed arrangement with Dubai Petroleum. The contract started in the Middle East in early 2018.
Oryx Petroleum has postponed a planned exploration well this year in the AGC Central license area offshore northwest Africa. Last year the company had requested an extension of the first renewal period of its production-sharing contract (due to end on Oct. 1, 2020) due to negotiations between Senegal and Guinea Bissau on the accord for their jointly-administered AGC area. Oryx said it expected the amendment to be finalized in the next few months. Due to the deferment of drilling, the company has cut its budget for activities on the license this year by $3 million.
Panoro Energy reported that it would cut its planned capex offshore Gabon this year by 40% to soften the impact of the recent oil price collapse.
The Dussafu joint venture, led by BW Energy, has decided to temporarily postpone the start of the Ruche Phase 1 development process until conditions improve.
Currently four wells (DTM-2H, DTM-3H, DTM-4H and DTM-5H) are producing into the FPSO BW Adolo at a gross rate of 20,000 b/d. The DTM-6H well, approaching the end of drilling and completion operations, will come onstream by June.
In an attempt to limit the spread of the COVID-19 virus, international travel restrictions currently in place are limiting movements of essential personnel, subcontractors, and equipment to and from Gabon.
These and the increasing global restrictions will likely impact the planned timing of the DTM-7H well and the subsequent firm exploration well. As a precaution, the Dussafu partners have decided not to exercise options for additional exploration wells.
EnQuest said that it has been reassessing its North Sea assets and related spending plans in light of the current lower oil price.It now looks as if production will not re-start at the mature Heather and Thistle/Deveron fields in the UK northern North Sea, which collectively generated about 6,000 boe/d last year. •
