uploads///Drilling permits

Why Was a Drilling Permit Issued in December?

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Jan. 31 2017, Published 11:16 a.m. ET

Shallow water drilling permits

In December 2016, one drilling permit was issued to drill a new well in the shallow water of the Gulf of Mexico in December. The drilling permit was issued after a drought in permits for the last five months.

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Deepwater drilling permits

The number of deepwater permits in the Gulf of Mexico rose after a drop in the previous two months. Five deepwater drilling permits were issued in December—up from one in November. In 2016, drilling permits showed an uptick in six months.

A drilling permit gives oil companies approval to start the process of drilling for wells. It’s important to track drilling permits. The number of permits gives us an idea of 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).

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Historical drilling permit counts

In 2015, the highest number of new well permits for shallow water drilling in any given month was two. Before oil prices started to fall 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 as well as 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 don’t comply with safety regulations and standards.

In December 2016, 16 drilling applications were returned for more information or clarification—compared to 17 in November. In December, eight applications were pending—compared to 11 in November

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