The deepwater Gulf of Mexico may have some catching up to do but it remains poised to regain its moxie as the year progresses, with independent operators continuing to do much of the heavy lifting.
“The Gulf of Mexico remains an important cash engine and a platform for higher return opportunities,” said Gregory Hill, president and COO of Hess Corp., which is set to return to active duty after taking a sabbatical during Covid-wrecked 2020.
In the first five months this year, the Bureau of Safety and Environmental Enforcement (BSEE) issued 16 new well drilling permits for waters deeper than 1,000’, with all but seven awarded to independents. By contrast, majors obtained 11 of the 21 new well authorizations issued for the same time frame last year. However, 15 rigs were active in the Gulf as of May 14, up three year-over-year, according to Baker Hughes.
“Gulf of Mexico activity is expected to increase with several projects starting late this year and in early 2022 with awards expected in the next several months,” Jeremy Thigpen, president and CEO of deepwater drilling contractor Transocean, said in a May 4 earnings call. “Importantly, if all of these projects move forward as expected, we believe that the entire Gulf of Mexico fleet of active rigs will be sold out later this year. This is something that the industry hasn’t even contemplated since 2014.”
As “compelling evidence of improving market conditions,” Thigpen pointed to the recent three-well contract for the warm-stacked Deepwater Asgard drillship with privately held independent Beacon Offshore Energy. The contract, which includes a one-well option, stipulates day rates of $240,000 for the first two wells, with the third well featuring a managed pressure drilling (MPD) component with a corresponding rate of $280,000 a day.
With three new drilling permits under its belt, Murphy Oil is going full-bore on a major development campaign in the deepwater Green Canyon. The project is on track to achieve first oil in the first half of 2022.
Meanwhile, fresh off company record quarterly production of 66,111 boed, Talos Energy, among the Gulf’s leading independents, claims it has encountered no problems acquiring drilling permits, despite President Biden’s posture toward fossil fuels. “We continue to obtain permits for operational activities in the ordinary course consistent with the timing we saw in previous administrations. We’ve not experienced any delays from our operations, nor do we expect any regular regulatory delays related to our work program going forward,” said President and CEO Timothy Duncan.