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Drilling Cutbacks Mean Service Companies Forced to Scrap Rigs
Drilling Cutbacks Mean Service Companies Forced to Scrap Rigs.
Despite the decline in oil prices, the U.S. is expected to boost production by 300,000 barrels per day in 2015, up to a yearly average of about 9.3 million barrels per day, according to the most recent government estimates.
But the number of oil and gas rigs in operation is already beginning to drop. For the week ending in December 19, the rig count dropped to 1,875 active rigs, down from 1,893 a week earlier. The fall off is an indication that exploration companies are beginning to pare back investments. Pulling back on drilling may result in a lower future production, which could hurt the growth prospects of some oil firms.
However, the slowdown in drilling activity is having a much more immediate and acute effect on a separate set of companies – those supplying the rigs.
Offshore oil contractors such as Halliburton or Transocean have seen their share prices tank worse than exploration companies because their revenue comes from being paid to drill, not necessarily from oil production after wells are completed. That means that when drilling slumps, their profits take an immediate hit. Even worse, exploration companies may see rising profits from existing production as oil prices rebound, but drilling service companies don’t benefit if their drilling contracts had been put on hold or cancelled.
Early Signs Of A Pullback In Drilling Activity
Early Signs Of A Pullback In Drilling Activity.
With oil prices low and showing no sign of an immediate rebound, the industry is beginning to pull back on spending.
Oil prices have dropped around 30 percent since summer highs, raising fears among producers across the globe. Yet, many oil majors are relatively diversified, with large holdings downstream. For example, ExxonMobil and Chevron have been insulated in the third quarter because of their large holdings in refining. Steep declines in oil prices may hurt their production sectors, but with lower priced oil as an input, big oil’s refining assets become more profitable.
For the third quarter, ExxonMobil reported a 3 percent rise in earnings compared to quarter three in 2013. That was largely driven by the Texas-based oil giant’s refining assets, which saw its profits rise by more than 70 percent from $592 million to $1.02 billion. Chevron’s refining program succeeded in quadrupling its profits in the third quarter, more than offsetting the hit the company has taken from the slide in oil prices.
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Lawsuit Filed to Protect Struggling Walruses from Arctic Oil Drilling » EcoWatch
Lawsuit Filed to Protect Struggling Walruses from Arctic Oil Drilling » EcoWatch.
Threats to walruses in the Arctic are in the spotlight again, as six environmental and conservation groups have filed a lawsuit against the U.S. Fish and Wildlife Service (FWS) challenging a rule that would allow oil companies to begin drilling in key walrus feeding areas in the Arctic’s Chukchi Sea by next year. Shell has already announced its intention to do so.
Earthjustice filed the lawsuit on behalf of Alaska Wilderness League, Center for Biological Diversity, Greenpeace, Resisting Environmental Destruction on Indigenous Lands, Sierra Cluband Natural Resources Defense Council. According to the plaintiffs, oil operations could force walruses out of their feeding areas, trigger stampedes, harm them with loud seismic blasts and put them at risk from the impacts of catastrophic oil spills which would be difficult to clean up in Arctic conditions.
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