U.S. GOM share of global offshore rigs is falling
The number of active offshore rigs in the Gulf of Mexico (GOM) has been steadily declining since 2000, according to a release from the Energy Information Administration (EIA). Over the past 15 years, the share of global offshore rigs in the GOM has declined from almost half of all active offshore rigs to less than 20% since 2008.
The number of active offshore rigs in the U.S. GOM declined from 122 in January 2000 to just 41 in January 2010, before falling to 19 in June 2010 following the Deepwater Horizon offshore explosion and blowout. The U.S. GOM active offshore rig count recovered to 57 by December 2014, and currently the number is 33, according to the EIA.
Worldwide, the number of offshore rigs has declined by 19% from since the decline in crude oil prices, falling to 304 in August 2015, down from 377 in August 2014. Lower oil prices were felt even more acutely in the GOM, with rig counts dropping by 46% over the same time period.
Technological advances have made the Gulf of Mexico a less attractive area to drill in, with a focus on deepwater (water depths greater than 1,000 feet) drilling pulling rigs out of the shallow waters of the GOM. Natural gas production from offshore has also become increasingly unattractive as production from the shale-driven onshore operations in the U.S. help keep downward pressure on natural gas prices.
Offshore rigs going worldwide
From 2000 to 2006, the share of active rigs operating offshore in Asia Pacific, the Middle East and Latin America grew significantly, with the offshore drilling in India and China largely accounting for the growth in the Asia Pacific region. During the early 2000’s, Qatar and Iran accounted for the growth in active offshore rigs in the Middle East, while Mexico accounted for most of the growth in Latin America over that same time period.
Since 2006, Saudi Arabia accounted for a large portion of the growth in the Middle East, while Brazil has been responsible for much of the increase in the active offshore rigs in Latin America.
Most of the recent growth in active offshore rigs outside of the United States has occurred in Africa, according to the EIA. Angola and Nigeria account for much of the growth in the region after 2010. Angola has more than 10 offshore oil projects expected to come online within the next five years. Nigeria’s offshore activities have been focusing on the deepwater and ultra-deepwater; at least three deepwater projects are in development and are projected to come online in the next five years.
VAALCO drilling offshore Africa
One of the players in Africa’s offshore market is Houston, Texas, based VAALCO Energy (ticker: EGY), which has offshore operations in Gabon, Angola and Equatorial Guinea. On September 16, VAALCO announced that brought its North Tchibala 1-H well online, offshore Gabon, West Africa. According to EGY, the well came online at a rate slightly in excess of 3,000 gross barrels of oil per day.
This is the second well drilled and placed on production at VAALCO’s new Southeast Etame/North Tchibala (SEENT) platform located in approximately 260 feet of water offshore Gabon. VAALCO is the operator of the Etame Marin permit area and owns a 28.1% working interest and a 24.4% net revenue interest. The Transocean Constellation II jackup rig is mobilizing over to the Avouma/South Tchibala platform to conduct workover operations to replace ESPs on three existing development wells, two of which are off production.
During his exclusive interview with Oil & Gas 360® at EnerCom’s The Oil & Gas Conference 20®, VAALCO CEO Steven Guidry, said that the EGY understands the area well, and was excited to see production. “It’s a reservoir that has been defined very well by four wells that were drilled by prior operators back in the 1980’s … but it has never been produced. We’re very excited to this opportunity.”
VAALCO boasts strong financial metrics as well in EnerCom’s® E&P Weekly scorecard. The company’s debt-to-market cap ratio is just 13%, compared to a group median of 95%. EGY’s net debt-to-trailing twelve month (TTM) EBITDA is also -4.7x, meaning they have more cash than debt, giving it a strong position even in today’s market. The group median for net debt-to-TTM EBITDA is 2.3x.