A quick look at the chart for Atwood Oceanics shows a familiar pattern for those who have been following the price action of companies in the offshore contract drilling industry. Shares of Atwood have declined by approximately 30 percent from the trading levels that prevailed in the weeks prior to the April 20, 2010 Deepwater Horizon disaster. However, Mr. Market is generally incapable of evaluating the details behind specific situations and appears to have unfairly discounted Atwood based on one surprising fact: Less than two percent of the company’s revenues in the current fiscal year were derived from activities in the Gulf of Mexico. Read this article for more details.
Noble Corporation predicts that additional capital expenditures necessary to comply with new regulations for drilling in the Gulf of Mexico should not exceed $10 million per rig. In the company’s second quarter 10-Q report filed with the SEC yesterday, management indicates that the exact amount required for rig retrofits cannot be precisely determined pending the release of final regulations. The amount required for each rig is expected to vary based on its age. It is also possible that Noble may incur similar costs for certain rigs that are presently located outside the Gulf of Mexico. Read this article for more details.
In a presentation released today, Contango Oil & Gas Company CEO Ken Peak provides more details regarding his view of the situation unfolding in the Gulf of Mexico. We have commented on Contango Oil & Gas in the past and believe that Mr. Peak provides some of the most useful commentary on oil and gas economics in the Gulf of Mexico. Recently, Contango announced new production and signaled an intent to return cash to shareholders through a special dividend or continued share repurchases. Read this article for more details on Mr. Peak’s presentation.
According to The Wall Street Journal, scientists have estimated that 62,000 barrels of oil per day, or approximately 4.9 million barrels in total, leaked into the Gulf of Mexico due to the blowout of BP’s Macondo well. Estimates have varied widely over the course of the disaster and it is not possible to come up with a precise figure for the leak. BP is currently preparing to permanently kill the well through a combination of a “top kill” maneuver and the completion of two relief wells. Under the Clean Water Act, BP will be fined at least $1,100 per barrel, but the figure could rise to $4,300 per barrel if the company is found to be “grossly negligent”. Read this article for more details.
The six month moratorium on exploratory deepwater drilling the Gulf of Mexico is continuing to heavily impact the economy of the Gulf Coast. Despite two court rulings, the federal government is continuing to insist on a complete halt to deepwater exploration until the commission appointed by President Obama reports on its findings. The commission report could still be months away. Meanwhile, the impact of the moratorium continues to devastate the Gulf Coast Economy.