Naomi B. Jones
March 11, 2008Exhibits
March 13, 2008
(AP) – Despite record high oil prices, the drilling rig count is dropping in the Gulf of Mexico – a trend that many oil executives say is probably misleading.
Louisiana energy companies say current prices leave them with more cash and more of an incentive to drill.
“What it does is give people some extra cash flow during the year where they might actually be able to drill another well or do another project,” said Kenneth Beer, chief financial officer of Stone Energy Corp. of Lafayette.
The number of rigs actively working in the Gulf has actually declined in the past year. As of Friday, 60 rigs were working in the Gulf, down from 87 one year ago.
“The Gulf (rig count) is kind of a head-scratcher,” said Gene Shiels, assistant director of investor relations at Baker Hughes Inc., the Houston company that has conducted industry wide rig counts since 1944.
Shiels said new regulations implemented by the U.S. Minerals Management Service after the 2005 hurricane season might have discouraged some activity in the Gulf. Also, the rig count tends to more closely track natural gas exploration as opposed to oil, Shiels said.
In addition, some rigs are leaving the Gulf of Mexico for foreign markets where they command higher rents, he said.
Clint Coldren, president of Bayou Bend Petroleum Inc. of New Orleans, said climbing oil prices are still generating interest in the Gulf of Mexico. The rig count might understate some aspects of drilling activity, he said.
In the past 10 to 15 years, energy companies have begun drilling farther out in the deeper waters of the Gulf, meaning today’s wells are more expensive and time-consuming, Coldren said.
“The wells being drilled are much more capital intensive than they were five years ago,” said Coldren, who hopes to drill as many as 12 Gulf wells this year. “You may not have as many wells drilled in a year’s time, but you’re spending a lot more money.”
Chris John, president of the Louisiana Mid-Continent Oil and Gas Association, also said he believes advancements in drilling technology may be influencing the rig count.
“Technology has reduced the need for numerous rigs when one rig with new technology could serve the same purpose,” John said.
John said interest among energy companies in bidding on leases for Gulf of Mexico drilling tracts is another good indicator of activity levels.
Last October’s lease sale, which generated $2.9 billion in high bids, was the second largest in the Gulf’s history.
The size of that sale is a sign that climbing crude prices “absolutely have an effect on interest in the Gulf of Mexico,” John said.
According to energy companies, current oil prices leave them with more cash and more of an incentive to drill. “The Gulf (rig count) is kind of a head-scratcher,” said Gene Shiels, assistant director of investor relations at Baker Hughes Inc., the Houston company that has conducted industry wide rig counts since 1944. * File photo • Tri-Parish Times
