Offshore rig count unchanged
For the week ended April 17, the US offshore rig count remained unchanged at 33. The offshore rig count increased the week before that, after four consecutive weekly offshore rig count decreases. It’s now at its lowest level since October 2011.
The offshore rig count is now nearly 50% off the four-year high of 66 that it reached on August 29, 2014. In the last year, the offshore rig count fell by 20. Nevertheless, the current offshore rig count is strong compared to its mid-2010 low of ~12.
Offshore rigs are different
Offshore wells are more expensive than onshore wells, but they have much longer production lives. Production is steady and can last for decades. Offshore projects also have long lead times. Falling crude oil prices won’t affect planned offshore production in the short term.
The offshore rig count fall indicates lower offshore energy activity by upstream and integrated energy companies. Chevron Corporation (CVX), Anadarko Petroleum (APC), and Exxon Mobil (XOM) together account for 31.2% of the Energy Select Sector SPDR ETF (XLE). CVX comprises 1.1% of the SPDR S&P 500 ETF (SPY). These energy companies operate in deepwater oilfields and benefit from higher offshore oil and gas production.
In the next part of this series, we’ll learn more about US offshore rigs, particularly the drilling activity in the Gulf of Mexico.