Deepwater GOM Rig Count to Pass Pre-Moratorium Levels by Year-End

The Gulf of Mexico deepwater rig count should surpass pre-moratorium levels by the end of 2012 and reach 45 to 50 rigs by 2014, according to Barclays Capital's September 2012 drilling permit report.

The Bureau of Ocean Energy Management (BOEM) last month issued 25 total permits for floating rigs, down from 27 permits announced in July and compared to 37 permits in June. The 25 permits issued include 21 exploratory permits and four permits for development jobs.

Three new well permits were issued in August, down four from July, and 19 revised new well permits were issued, Barclays reported.

"Despite the dip in permits issued in August, we believe permit activity in the U.S. Gulf of Mexico remains healthy and suggest a continued improvement in the permitting process, which was stifled following the moratorium, and indicates the floating rig count is set to increase further as more deepwater rigs migrate to the region," Barclays analysts noted.

Two the permits issued last month were issued for the ultra-deepwater Gulf, both for Shell with the Noble Danny Adkins (UDW semisub), Barclays reported.

BOEM permit announcements tend to lag contract awards for the offshore drillers typically by a couple of weeks, Barclays analysts noted. However, offshore permit issuances are one of the final steps prior to the start of drilling, and help indicate future offshore activity levels.

Ultra-deepwater drilling activity has picked up worldwide, including areas outside the deepwater 'Golden Triangle' of the U.S. Gulf, Brazil, and West Africa. As a result, drilling contractors such as Transocean are seeking growing demand for ultra-deepwater drilling rigs.

The non-binding letter of intents entered by drilling contractor Transocean for four ultra-deepwater drillships will strengthen Transocean's ties with a best-in-class major, which Barclays believes to be Shell, and moves the company up the technology curve with state-of-the-art assets, according to a Barclays Sept. 13 analyst note.

The units are not arctic class, said Barclays analysts, who believe Shell could intend for the rigs to initially work in the U.S. Gulf.

"Due to Transocean's international domiciling, we believe there is scope for a tax rate significantly lower than the company's corporate tax rate in the event the rigs work in the U.S. Gulf of Mexico," Barclays analysts reported. That tax rate could be as low as the mid-single digits, in line with Rowan's tax rate expectations for drillships working in the U.S. Gulf.
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Karen Bowman
Author: Karen Bowman