Gulf of Mexico rigs
In the previous two parts of this series, we discussed US onshore and offshore rig counts.
Rig counts in the Louisiana section of the Gulf of Mexico, or GOM, measure offshore rig activity in the United States. This area accounts for almost all offshore drilling in the country. The Gulf of Mexico rig count was down by two compared to the previous week, with 33 rigs in the week ending March 27, 2015.
In 2010, the Gulf of Mexico rig count fell sharply after BP’s (BP) Deepwater Horizon oil spill, which led to government-imposed restrictions. The GOM rig count didn’t recover to pre-accident levels for several years. By September 2012, it averaged ~50 rigs, and it reached 63 in August. In 2014, the average rig count in the Gulf of Mexico was ~55. This year, it has averaged 48 so far. BP makes up 4.9% of the iShares Global Energy ETF (IXC).
US offshore production unabated
Despite a lower Gulf of Mexico rig count, US offshore oil projects are growing. According to the Energy Information Administration, or EIA, three deepwater projects began in the GOM in 4Q14. Stone Energy (SGY), Chevron (CVX), and Murphy Oil (MUR) operate these projects in mature oilfields.
Stone Energy and Murphy Oil account for 2.75% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Eight more projects are expected to come online in 2015, which will add 265,000 barrels of crude oil per day to production totals.
Gulf of Mexico activity may face headwinds in 2015
Jack-up rigs are mobile offshore drilling units that perform drilling and work-over operations to lift or extract energy. According to the industry news organization Rigzone, jack-up rig use is likely to fall below 50% in 2015—lower than the 30% drop estimated earlier. This forecast is due mainly to lower crude oil prices.
Read more on oilfield services companies’ views on the current rig count scenario in the following part of this series.