The movie Rocky II depicts Rocky and his fight manager Mickey praying over Rocky's wife Adrianne who is terribly ill. As Adrianne recovers and gives Rocky the go-ahead to fight again, Mickey shouts, "What are we waiting for?" Rocky returns to the ring and wins the fight.
As the owner of six offshore supply vessels and one being built, I need Mickey's enthusiasm to ignite the Gulf of Mexico because I'm tired of waiting. I've owned a business since 1996, and have been an employee in the Offshore Marine Industry since 1979. I have witnessed first hand the many ups and downs of the offshore industry in the Gulf of Mexico. It is because of these ups and downs that today's market is so hard to understand.
My friends in the offshore rig business have had work, but do not have backlog. Their rates, described to me from oil companies, are very fair. The same is true in the supply boat business. We are active, but don't have future jobs lined up. Our lease rates are forcing wage reductions and benefit reductions to our employees. Our company wants to grow. This year, we will invest over $4 million in a state-of-the-art fast supply boat. We will invest up to $700,000 in Coast Guard inspections on vessels that are old but have a great deal of life in them. We are determined to stay and fight in the Gulf of Mexico.
We have great customers that aren't waiting. They see today's prices and are moving forward with numerous drilling and or production projects, only to be held back by partners. When will our rig activity ever catch up to today's commodity prices? I saw our industry make it through 1991-1992, when lease rates for our vessels was 50 cents on the $1 less than now, when commodity prices were 60%-70% less than today; so I know it can return. My question is, why not now?
I understand that today's commodity prices alone can't justify a well that may take 24-48 months to be planned, drilled, and put on line. But commodity prices have been strong for 24-plus months, and they certainly don't appear to be falling any time in the near future. As a boat owner, I'm like a captured mouse. I don't want the cheese, I just want out of the trap.
Although I would love to see our lease rates return to 2001 levels, if we could achieve a 50% return and a 25% rig increase, we would be on our way.
For the better part of 30 months, I have watched our rig count fall, service prices drop, and have spoken with dozens of our customers as they try to explain or question why the Gulf is so slow. Of course, the broken-record answer is "lack of prospects." Again, I question what prospects they are waiting for.
Prior to writing this article, I questioned the MMS on how many leases have been awarded, but not drilled. The response was that the question nearly killed their data system. It is a very large number, and as evident of the $369 million placed by 83 companies on high bids in the MMS Lease Sale 190, many more leases are being acquired.
I am lost as to how a lease holding can't be attractive to drill at today's oil and natural gas prices. If a prospect is not economical at $33-$37 oil and $5-$5.70 natural gas, with today's rig and boat prices, when will it be?
I have a very hard time believing that current lease holdings were purchased or the economics were performed based on commodity levels anywhere near where they are right now. At the time this article was written, my rig count information showed that there were only 10 rigs employed by ExxonMobil and Shell Oil Co. Where have the days gone when Shell, Exxon, or Mobil each employed 10-15 rigs and commodity prices were 25%-30% less than they are now?
When is the Gulf of Mexico going to have their sequel? When are we going to stand up and fight? We have been down for close to three years.
I believe it's our turn to stand up like Rocky and ask for a rematch, to put our rigs back to work, our boats back to work, put the service companies back to work, and get back in the fight.
Ralph McIngvale
President
Southern States Offshore
This page reflects viewpoints on the political, economic, cultural, technological, and environmental issues that shape the future of the petroleum industry. Offshore Magazine invites you to share your thoughts. Email your Beyond the Horizon manuscript to Eldon Ball at [email protected].
