Gulf of Mexico rigs
The Gulf of Mexico rig count was up by one compared to the previous week, with 32 operating rigs in the week ended April 17, 2015, according to Baker Hughes. 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.
According to the industry news organization Rigzone, the utilization of jackup rigs was ~68% on April 17, 2015. In comparison, jackup rig utilization was 78% a year ago. According to the U.S. Energy Information Administration (or EIA), 13 projects are expected to come up in the GOM in the next two years, eight in 2015 and five in 2016.
Jackup rigs are mobile offshore drilling units that perform drilling and workover operations to lift or extract energy. According to Rigzone, jackup rig utilization is likely to fall below 50% in 2015. This forecast is due mainly to lower crude oil prices.
GOM rig count up since Deepwater Horizon spill
In 2010, the Gulf of Mexico rig count fell sharply after BP’s (BP) Deepwater Horizon oil spill, which led to government-imposed restrictions. BP makes up 4.8% of the iShares Global Energy ETF (IXC). The GOM rig count didn’t recover to pre-accident levels for several years. By September 2012, it averaged ~50 rigs. Then the count continued to increase until it reached 63 in August 2014. This year, it has averaged 45 so far.
Despite a lower Gulf of Mexico rig count, US offshore oil projects are growing. According to the EIA, five deepwater projects began operations in the GOM in 4Q14. They are operated by Stone Energy (SGY), Chevron (CVX), and Murphy Oil (MUR).
Murphy Oil accounts for 1.3% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Eight more projects are expected to come online in 2015, which should add 265,000 barrels of crude oil per day of production.