Fifth Straight Month of No Drilling Permits for Shallow Water Drilling
Shallow water drilling permits
As in October 2016, no drilling permits were issued to drill new wells in the shallow water of the Gulf of Mexico in November. This is the fifth straight month in which no drilling permits were issued for shallow water.
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Deepwater drilling permits
The number of deepwater permits in the Gulf of Mexico dropped again in November 2016, following a drop in October. In November 2016, one drilling permit was issued, down from four in October. In the last 11 months of 2016, drilling permits have shown an uptick in five of those months.
A drilling permit gives oil companies approval to begin the process of drilling for wells. It’s important to track drilling permits, as the number of permits gives us an idea how future active rig counts and utilization rates could change.
A higher number of drilling permits suggests an improving outlook for offshore drilling (IYE) companies such as Ensco (ESV), Ocean Rig (ORIG), Seadrill (SDRL), Seadrill Partners (SDLP), Noble (NE), Transocean (RIG), Atwood Oceanics (ATW), Diamond Offshore Drilling (DO), Rowan Companies (RDC), and Pacific Drilling (PACD).
Historical drilling permit counts
In 2015, the highest number of new well permits for shallow water drilling in any given month was two. Before the oil price plunge began in 2014, the highest new well permit count in any given month was nine.
For deepwater wells, the highest number of new well permits in any given month was 11 in 2015 and 12 in 2014.
Returned and pending applications
Like new and pending applications, returned and pending applications give us an idea of the probability of seeing permits approved in the coming months. However, returned applications may not be granted if companies fail to comply with safety regulations and standards.
In November 2016, 17 drilling applications were returned for further information or clarification, as compared to 16 in October. In November, 11 applications were pending, compared with ten in October.