Offshore Drillers Still Seeking Recovery Enjoyed by Shale
(Bloomberg) - While oil drillers in U.S. shale basins are starting to see business come back, their offshore brethren will have to wait for prices to surge well above $60 a barrel.
U.S. offshore operators like Diamond Offshore Drilling Inc. and Atwood Oceanics Inc. are down more than 15 percent in the last month, as companies focus on onshore oil that reaps better returns. With oil trading near $53 a barrel, firms are looking toward booming plays like the Permian Basin in West Texas and the Scoop and Stack formations in Oklahoma, according to Marc Edwards, Diamond Offshore’s chief executive officer.
“From an operator perspective, they still have choices as to how they deploy their capital. And, of course, I think, we all understand that right now competing with the unconventional place is quite difficult from a deepwater perspective,” Edwards said. “In the short run, if oil stays in a range bound, let’s say $50 to $55, I think you’ll see our clients’ capital still have a propensity to be to deployed to unconventional light-tight oil onshore.”
Members in the Bloomberg Intelligence Global Offshore Drilling Competitive Peers Index sank 5 percent Monday. As demand continues to fall and the number of idle rigs rises, the offshore drilling industry remains a few years away from a rebound, Atwood Oceanics management said on a call with investors and analysts.
“The idea of $60 oil pushing producers to go offshore might be optimistic, ” David Anderson, an analyst at Barclays Plc, said by phone. “Even though the costs and the time to market have come down, offshore is nowhere near as enticing as onshore drilling.”
Onshore Recovery
While offshore drillers are using the same number of rigs as a year ago, onshore focused companies are continuing to add rigs and expand production. U.S. drillers are continuing to boost production, adding 267 rigs in the last eight months, according to Baker Hughes Inc. data reported on Friday.
The boosted business is welcome news to companies that supply the gear for the onshore recovery, including National Oilwell Varco Inc. For the first time in more than a decade, the biggest U.S. maker of oilfield equipment generated more sales from land gear than it did from offshore in the final three months of the year. The Houston-based company rose as much 7.8 percent on Tuesday after reporting fourth quarter results that beat analysts’ expectations.
"I’m glad 2016 is behind us," Clay Williams, chief executive officer at National Oilwell Varco, told analysts and investors Tuesday on a conference call. "In the fourth quarter, we benefited from rising momentum in North American shale plays in particular, which we expect to accelerate."
The Permian Basin has seen production double and a jump in merger activity as companies that are operating in the region are taking advantage of breakeven levels that are much lower than their deepwater competitors.
“What we’re seeing, especially today, is a recognition that onshore and offshore drilling are in two separate cycles that are moving at very different paces,” said Anderson.
-With assistance from David Wethe. To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Stephen Cunningham
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- ExxonMobil Racks Up Discoveries in Guyana Block Eyed by Chevron
- Oil Market Sentiment Has Improved Significantly
- EU, US Eye Collaboration on Nuclear Materials
- USA Driving Activity to Increase to All-Time Highs
- TC Energy to Sell Prince Rupert Gas Pipeline Project to First Nation
- EU Electricity Export to Ukraine Up 94 Percent in Two Years
- China Coal Output Falls for First Time since Government Ordered More
- BP Pulse Buys One of Europe's Largest Truck Stops
- UK CCUS Plans Outdated: Think Tank
- North America Enters Rig Loss Streak
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- Rystad Looks at the Buzz Around White Hydrogen
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension