Offshore Drilling Makes Comeback

The below story if it pans out should be good for Speedcast as its one their largest divisions which has struggled of late

Offshore Drilling Makes Comeback After Years in Shale’s Shadow2019-03-27 20:06:46.47 GMTBy David Wethe and Rachel Adams-Heard(Bloomberg) -- Offshore is ready for the limelight again.After years in the shadow of the U.S. shale patch, deep-water explorers from Royal Dutch Shell Plc to Talos Energy Inc.,along with contractors such as Ensco Plc and TechnipFMC Plc,told investors at the Scotia Howard Weil Energy Conference inNew Orleans this week they see a revival coming. That was astark contrast to a subdued outlook for shale at the event.“The offshore recovery is under way today,” Jon Baksht,chief financial officer at Ensco, told investors Tuesday at theconference. “This isn’t something that we’re waiting for.”While U.S. shale remains a global hot spot, withmultibillion-dollar investment plans from supermajors ExxonMobil Corp. and Chevron Corp., independent producers have beenunder pressure from investors to focus on delivering returnsrather than ambitious growth plans. At the same time, afternearly half a decade of consecutive spending cuts, the offshoreindustry is expected to finally boost spending again to develophigher-gushing oil wells.Offshore GuyanaHess Corp., which has assets in shale and in offshore, madethe starkest contrast between the two basins during theconference when Chief Executive Officer John Hess showed a slideabout what it would take to get the same amount of oil from theworld’s busiest shale patch, the Permian Basin of West Texas andNew Mexico, versus Guyana, one of the biggest discoveries of itskind offshore.To suck out the equivalent of 120,000 barrels of oil a day,the Permian Basin would need a $12.8 billion investment comparedto $3.7 billion for the first phase of the Liza section of theGuyana project, in which Hess is teaming up with Exxon.Offshore capital spending has been cut in half since oilprices first started to fall in 2014. This year explorers andproducers are expected to boost offshore spending 3 percent to$155 billion and another 10 percent next year, according toEnsco slides on Tuesday. That compares to a double-digit drop inspending in North American land this year, Schlumberger Ltd. andHalliburton Co., two of the biggest providers of oil services,told investors on Monday.Tim Duncan, CEO of deep-water explorer Talos Energy Inc.,considers himself a contrarian for wading farther into the Gulfof Mexico when others were flocking to the Permian, whichstraddles Texas and New Mexico.“Investors are thinking about being basin-agnostic again,and that at least gives us the opportunity to reintroduce theGulf of Mexico,” Duncan said Tuesday in an interview in NewOrleans. “It’s allowing investors to just rethink under a newlens how they view offshore, and we have to take advantage ofthat opportunity.”Oil AuctionsFracking shale rock for oil and gas can be done in a matterof months. But it may take years to develop a deep-water area,and before any rigs can start drilling, governments around theworld need to auction exploration and production permits. Thoseauctions have been more frequent lately.“Take a look back from when we were at this conference oneyear ago today and we’re up 25 percent just in terms of thenumber of open tenders that are out there year over year,” saidBaksht of Ensco, which is poised to become the world’s biggestoffshore rig contractor if its merger with Rowan Cos. closeslater this year. “We are seeing that increase in spending andincreased activity in the offshore space today.”So much so that for the first three months of this year,equipment maker TechnipFMC is expecting a quarterly record forinbound orders of subsea gear, an historical proxy for offshoreactivity because all wells away from land need the valves andpumps that sit on the seafloor.The return to offshore activity is just a start, though.It’s not a full-fledged boom. There is still a glut of older,unused rigs keeping drilling contractors from having widespreadpricing power for pushingup the rents on their vessels.But for Diamond Offshore Drilling Inc. CEO Marc Edwards,simply hearing of spending hikes from other large explorers suchas Equinor ASA and Petroleo Brasileiro SA was critical torealizing better days are ahead."Their exploration budgets are significantly moving north,"he said. “That’s the first sign of recovery we needed in theoffshore space.”