The poor lads at OPEC can’t catch a break. They keep slashing production and American shalefags keep offsetting the supply dynamics through wanton drilling. Now, out of nowhere, deep water drilling costs are collapsing, which has led to a resurgence in the practice.
The old line in the sand for deep water drilling used to be $100 per barrel. Since the, austerity corrected the wayward spending habits of overzealous drillers. Now we’re looking at $40 per barrel as being the break even point.
“There is life in deep-water yet,” said Angus Rodger, director of upstream Asia-Pacific research at Wood Mackenzie in Singapore. “When oil prices fell, many projects were deferred, but the ones that were deferred first were deep-water because the overall break-evens were highest. Now in 2017, we’re seeing signs that the best ones are coming back.”
Recent projects include Kaikias in the Gulf of Mexico by Royal Dutch Shell, with a break even of below $40. BP, the fucking destroyer of the GOM, is starting a new asshole project, ironically dubbed ‘Mad Dog Phase 2’ that will cost $9b, down from $20b.
According to Transocean, a total of 8 offshore projects are set for approval over the next three years — all with breakevens below $50.
Rental rates for rigs have been halved since 2014, leading many experts to believe a bottom might be in for the sector. If so, there are a slew of deep water drillers worth looking at whose shares have been obliterated — namely RIG (-37%), HP (-32%), NBR (-47%), OAS (-36%), WLL (-41%), ESV (-35%) and BBG (-51%).
The post Deep Water Drilling Costs Have Collapsed, Paving the Way for Renewed Activity in the Gulf appeared first on Trading with The Fly.
June 01, 2017 at 07:46PM
from Dr. Fly
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