Things are looking up for the Gulf of Mexico in 2006, as several of the articles in our annual GoM Special Report this month indicate.
First of all, GoM drilling is expected to increase by 13 % this year - reaching a total of 837 wells. Of that number, 672 - or about 80% - will be drilled in less than 1,500 ft of water, while 165 (or 20%) will be drilled in 1,500 ft of water or greater.
If you think that’s a drop in interest in deepwater, think again. The number of wells forecast for exploration in water depths greater than 1,500 ft indicates a 46% increase, the most significant improvement over 2005. The number of wells projected for development in the same water depth will improve by 12, or 29%. Finally, 111 deepwater wells - 67% of those planned in deepwater - are for exploration.Senior Editor David PaganiejoinsJamesandTed Dodsonin examining the details of Dodson’s annual forecast, beginning onpage 34.
Second, consider the case of Todco. The drilling contractor reactivated seven cold-stacked rigs against term contracts in 2005 - six for operations in the GoM, and one for use offshore Angola - and is confident that it will secure contracts to justify the reactivation of most of its remaining cold-stacked fleet based in the GoM by the end of 2006. The company anticipates that it will hire 600-800 personnel over the next six to nine months to accommodate its current and anticipated reactivations. David Paganie talks withJan Rask, president and CEO of Todco, andScott O’Keefe, executive VP, Finance and Administration, beginning on page 42.
Finally, you can expect to see an increase in merger and acquisition interest in the GoM by both domestic and international companies, given the cash flow generation from offshore properties. In fact, that’s a trend that appears to have already begun, according to Raymond James & Associates, Inc., equity research analysts.
Norway-based Hydro, for example, is growing its presence in the GoM through acquisition of US-based Spinnaker Exploration Co. Completion of the $2.45 billion all-cash transaction was announced on Dec. 14. The combined company’s total production is expected to reach about 50,000 boe/d by 2008 and total reserves are estimated to reach 129 MMbbl.
Tokyo-based Nippon Oil Exploration U.S.A. Ltd., a subsidiary of Nippon Oil Corp., and Norway-based Statoil plan to expand their interests in the GoM through property acquisitions. And Woodside Energy (USA) Inc.’s strategy to build a presence in the GoM was clear when it formed an alliance with US-based Explore Enterprises. Under the agreement, both companies will jointly invest in the shelf and deep waters of the Gulf. The alliance is good for five years and includes an option to extend a further two years. See Paganie’sGulf of Mexico column that begins on page 14 for more details.
So, it doesn’t take a soothsayer to connect the dots. All signs are pointing to a robust year for the Gulf of Mexico. Plan accordingly.
