After over two decades, WorkBoat suspended its monthly offshore service vessel day rate analysis in April due to depressed market conditions.

In our August issue, we are introducing the new WorkBoat Gulf of Mexico (GOM) Index. It replaces the OSV and crewboat day rate and utilization information.

The new index aims to track market conditions in the U.S. Gulf that effect rates and activity levels for OSVs. The new index is comprised of three elements: West Texas Intermediate oil prices taken from the U.S. Energy Information Administration (EIA), active U.S. Gulf rig counts taken from the Baker Hughes rig count, and U.S. oil production figures also from the EIA. The baseline for the index is June 2016.

The price of oil is the key element in increasing and sustaining activity in the Gulf of Mexico. It has bounced around from highs in the $100-bbl.-plus range in the last few years and has settled lately in the $40-$50-bbl. range. Positive improvements in the price of oil, measured from the baseline, stimulate activity and are entered as positive numbers. Prices below the baseline are counted as negative numbers.

The active GOM rig count is also a key indicator and is driven both by the price of oil and gas and the costs of offshore exploration and production in the U.S. As each rig employs, on average, 2.5 workboats, an increase in rig count is a positive for the workboat industry.

Finally, the GOM Index incorporates domestic oil production figures. Oil production, and particularly burgeoning shale production, has displaced a significant amount of offshore activity due to its lower cost and higher productivity. That trend looks set to continue. An increase in oil production from the baseline has a negative affect on offshore activity. Conversely, a fall in oil production is positive, due to its potential to stimulate offshore activity.

The GOM Index is then compared with OSV utilization rates from IHS Markit. While there is always a lapse of several months in the OSV market’s response to changing conditions in the U.S. Gulf, this index will help readers chart the emerging market trends in U.S. offshore waters.