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Tuesday, 02 December, 2008, 02:50 GMT | more >>

Services players sitting pretty in US Gulf



By Upstream staff 

Oil services companies that help energy companies explore deep-water tracts should benefit from this week's brisk lease sale for blocks in the central US Gulf of Mexico, analysts said today.

The auction drew more than $2.9 billion in winning oil and gas lease bids yesterday, with Shell spending the most on winning bids and BP winning the most tracts, officials said.

"It was very impressive, particularly in the deepwater," said Pierre Conner, oil service company analyst with Capital One Southcoast. "The perception I have is that technology allows for more activity, and technological success begets more activity."

About 40% of the blocks receiving bids in the sale were in what the US Minerals Management Service calls "ultra-deep water," more than 5,249 feet deep.

The earliest beneficiaries of the auction will be seismic companies like France's CGGVeritas, whose technology is used to look for and map potential oil and gas deposits, Conner said.

Schlumberger WesternGeco seismic unit will likely also see more business in the region, analysts said.

High bids brought in $750 per acre, far higher than the $240 per acre seen in the past from Central Gulf of Mexico sales. That increase signals the "appetite for deep-water prospects continues to grow," energy investment bank Simmons & Co wrote in a note to clients.

The auction is also positive for deep-water drillers like Transocean, GlobalSantaFe, Noble and Diamond Offshore Drilling, Tudor Pickering Energy wrote in a research note.

Current deep-water rig supply is tight, and lease rates for rigs in the US Gulf of Mexico have already cracked $500,000 a day, company data show.

Eventually, oil service companies that provide subsea production systems like Cameron International and FMC Technologies will benefit from the deep-water exploration in the Gulf, analysts said.

The sale offered 5359 tracts covering 28.7 million acres in federal waters off Louisiana, Mississippi and Alabama. Winning bids were submitted on 723 tracts.

The government estimates maximum potential recovery of oil and gas from the tracts tentatively leased at 1.3 billion barrels of oil and 5.2 trillion cubic feet of natural gas.

The Gulf currently produces 25% of domestically produced US oil and 15 percent of gas, MMS said.


Thursday, 04 October, 2007, 18:02 GMT  | last updated: Thursday, 04 October, 2007, 18:02 GMT

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