Ocean Installer wins subsea installation job in GoM
Ocean Installer has been awarded a subsea installation job in the Gulf of Mexico with one of the world’s leading international oil and gas companies on its largest deepwater producing field which sits in over 1800m water depth.
This is Ocean Installer’s first SURF contract in the GoM and marks a milestone for the company in the region.
The project, which involves the installation and testing of umbilicals and associated equipment, will be managed from the Ocean Installer Houston office with onshore preparations starting immediately. Offshore work will take place this summer and Ocean Installer will be utilising the Subsea Construction Vessel (CSV) the Normand Clipper, which is on a long-term charter from Solstad Offshore.
“This is our first SURF job in the GoM and we are very pleased to have secured this work only a year after we established our Houston office and less than four months after introducing our first vessel in the region. We are now looking forward to working closely with our client to execute the project in a safe, high quality and efficient manner,” says Mike Newbury, President of Ocean Installer in the US.
Ocean Installer opened its Houston office in April 2013 and the Normand Clipper arrived in Houston in January. The vessel has been well-received in the market and has since its arrival experienced good utilisation executing several jobs in the regional spot market.
Press Release, May 02, 2014
Oil Industry Starts to Squeeze Costs, Wages
Thursday, January 30, 2014 by Reuters – John Kemp
LONDON, Jan 30 (Reuters) – Cutting the cost of everything from salaries and steel pipes to seismic surveys and drilling equipment is the central challenge for the oil and gas industry over the next five years.
The tremendous increase in exploration and production activity around the world over the last ten years has strained the global supply chain and been accompanied by a predictable increase in operating and capital costs.
When oil and gas prices were rising strongly, petroleum producers and their contractors could afford to absorb cost increases.
But as oil and gas production have moved back into line with demand, and prices have stabilized, the focus is switching once again to cost control.
“Operational excellence,” a euphemism for doing more with less, is back in fashion and set to dominate industry thinking for the rest of the decade.
Paal Kibsgaard, chief executive of Schlumberger, one of the largest service companies, has been emphasising “smart fracking” and other ways to raise output and cut costs for two years.
Speaking as long ago as March 2012, Kibsgaard warned: “In the past ten years, exploration and production spend has grown fourfold in nominal terms, while oil production is up only 11 percent.”
“In this environment, we believe our customers will favour working with companies that can help them increase production and recovery, reduce costs, and manage risks,” he added.
Schlumberger’s website and those of its main competitors Halliburton and Baker Hughes all prominently feature technologies and processes intended to cut costs, such as dual-fuel diesel-natural gas drilling and pumping engines.
It is just a small example of profound industry shift from an emphasis on increasing production to controlling spending.
Issuing a shocking profit warning on January 17, Royal Dutch Shell ‘s new chief executive pledged to focus on “achieving better capital efficiency and on continuing to strengthen our operational performance and project delivery.”
On Thursday, the company cut its capital budget for 2014, and announced it was suspending its controversial and expensive Arctic drilling programme.
Shell is catching up with peers like BP and Chevron , as well as perennially tight-fisted Exxon, in promising to stick to a tighter spending regime and return more value to shareholders .
The problem is not unique to oil and gas producers. Miners like BHP Billiton, Rio Tinto and Anglo American have all axed projects and pledged to tighten capital discipline after costs spiralled out of control.
The worst over-runs have been on so-called megaprojects – investments costing over $1 billion, sometimes much more. In fact, the bigger project, the worse the cost overruns and delays have tended to be.
Pearl, Shell’s enormous gas to liquids project in Qatar, is now regarded as a success, but was seriously delayed and went wildly over-budget.
Other megaprojects like Chevron’s Gorgon LNG in Australia and the Caspian oil field Kashagan – which is being developed by an industry consortium including ENI, Shell, Total, Exxon and Conoco – have been similarly late and bust their original cost estimates.
It is convenient, but wrong, to blame poor project management for all the days and cost overruns. Some decisions have been flawed, but on projects of this size and complexity, at least some errors are to be expected.
Megaproject managers in 2013 were not, on the whole, worse than in 2003. Unfortunately, the economic and financial environment has become much less forgiving. When projects start to go wrong it has proved much harder to limit the delays and damage to the budget.
By their nature, megaprojects are so big they strain the global construction and engineering supply chain and pool of skilled labour. Megaprojects create their own adverse “weather,” pushing up the cost of specialist labour and materials worldwide.
Attempting to complete even one or two megaprojects with similar characteristics at the same time can strain the global supply chain to the limit. Attempting to complete several simultaneously is a recipe for severe cost escalation and delays. The multi-commodity boom over the last decade created a “perfect storm” for the megaproject industry.
While there is not an exact overlap, massive offshore oil fields like Kashagan, LNG facilities like Gorgon, floating LNG platforms like Prelude (destined for Australia), gas to liquids plants and even simple onshore shale plays like North Dakota’s Bakken, are all competing for the same limited pool of skilled engineers, construction workers and speciality steels.
The result has been a staggering increase in costs and wages. And once a project falls behind, there is no slack in the system to hire extra workers or procure additional or replacement components to get it back on track.
Supply Chain Responds
Rampant inflation and delays have been worst on megaprojects because they require a much higher proportion of very specialist components and the supply chain is least-elastic.
But even simpler projects like shale oil and gas have been plagued by a rapid rise in costs as they stretch the availability of drillers, rigs and pressure pumping equipment, as well as fracking sand, fresh water and guar gum.
Between the end of 2003 and the end of 2013, the number of employees engaged in oil and gas extraction in the United States increased by 70 percent, from 117,000 to 201,000, according to the U.S. Bureau of Labor Statistics.
Soaring demand for specialised workers has produced an entirely predictable surge in wages.
Employees in North Dakota’s oil, gas and pipeline sectors were taking home an average monthly salary of $9,000 in the fourth quarter of 2012, and staff at support firms were making an average of more than $8,000, according to the latest data from the U.S. Census Bureau.
Their colleagues in Texas were doing even better: average salaries in the oil and gas extraction industry were over $15,000 per month, and $11,000 in pipeline transportation.
That made them some of the best-paid employees in the United States. Only financial services employees in New York ($28,000), Connecticut ($25,000), California ($17,000) and a few other states were routinely making more.
Rising wages and other prices were the only means to ration scarce workers and raw materials. But they were also the only way to attract more workers and supplies into the industry.
It takes a long time to train new drillers, petroleum engineers and construction specialists, and give them the experience needed before they can assume positions as experts and team leaders.
Similarly, the expansion of specialist construction facilities and manufacturing firms for items like oil country tubular goods takes years; and companies will only expand or enter the industry if they are convinced the upturn in demand will be durable rather than fleeting.
While the boom in oil and gas prices dates from around 2003 or 2004, the big expansion of exploration and production spending started much later, around 2006 or even 2007, and it has only filtered down to the labour pool and the rest of the supply chain much more slowly.
It is the long delay between an increase in demand for oil and gas, an increase in production and exploration activity, and an expansion of the whole supply chain, which explain the deep cyclicality of the petroleum industry and mining.
Extreme cyclicality is hard-wired into oil, gas and mining markets. Companies like Shell which have tried to ride through the cycle by ignoring short-term price and cost changes to focus on the long term have eventually been compelled by their investors to fall into line.
In the next stage of the cycle, oil and gas prices are set to remain relatively high but are unlikely to rise much further. For exploration and production companies, increasing shareholder value therefore means increasing efficiency and bearing down on costs, including compensation and payments to suppliers and contractors.
For the supply chain and oil-industry workers, capacity and the availability of skilled labour will continue to expand, while demand is set to stabilise or taper off. Major oil companies and miners have already cancelled some projects. Costs, wages and employment will fall, or at least start rising much more slowly.
Deep Water Drillers Could Plunge 35%, Barclays Says
The past 12 months have been tough for drillers like Transocean (RIG), Seadrill (SDRL) and Diamond Offshore (DO)–and the stocks don’t look to be finding a bottom anytime soon.
Barclays James West and Zachary Sadow explain:
Our Base case assumes dayrates continue to slide with UDW dayrates dropping to $475k and total average rates dropping 16% from our bull case. We think this is the most likely outcome as we continue to believe the market still needs to work through excess capacity and that conditions will get worse before they get better. In this environment, we anticipate utilization would drop modestly as well. Overall, we expect EPS to be below our 2015 EPS estimates by 38% (ex-HERO) and EBITDA to be 26% below our 2015 EBITDA estimates. Companies with larger portions of fleets derived from older assets would be the most impacted. Under this scenario, all companies in our coverage universe (except Rowan (RDC)) are subject to share price depreciation with an average pullback of 35% (-28% ex-[Vantage Drilling Company (VTG)]). At these levels, we would expect companies with higher leverage levels to be more impacted and see potential for financing events as equity values contract.
Under this scenario, Rowan could gain 2% while Seadrill could plummet 52%, Diamond Offshore could plunge 45%, Transocean could fall 24% and Atwood Oceanics (ATW) could drop 15%.
Read more: Here
Deep Water Drillers Could Plunge 35%, Barclays Says – Stocks To Watch – Barrons.com.
USA: Hercules Offshore Sells Domestic Liftboats to All Coast
All Coast, LLC, a newly formed company for the marine services industry founded by John Powers and John Nesser III, has completed the acquisition of Hercules Offshore’s domestic liftboat assets.
This $57.5 million acquisition includes 29 actively marketed liftboats ranging from class 105 to class 229, 10 inactive liftboats and additional related assets.
All Coast is a limited liability company, newly formed for this transaction, with John Powers and John Nesser III leading as Managers and Co-CEOs.
Powers and Nesser, All Coast managers and co-chief executive officers, each have more than 40 years of experience in the oil and gas, engineering and maritime industries.
Throughout his career, Powers has owned and operated numerous energy and marine services companies including Power Offshore Services, LLC; Reeled Tubing, LLC; Seatrax, LLC; and Coastal Drilling Co.
Previously, Nesser served as the executive vice president and chief operating officer for McDermott International, where he held executive positions for more than 10 years.
All Coast domestic operations will be led by Byron Allemand, vice president and chief operating officer, and the operations center will remain in Lafayette, La.
Nesser commented that “John and I have been looking for the opportunity to re-enter the liftboat industry as owners and operators for several years.
“We look forward to the challenge of serving the offshore market with the highest standards of service and safety,” Nesser further noted. “We expect to grow All Coast and expand our fleet with new acquisitions and new builds.”
Joining Powers and Nesser is The Fleming Corporation, a private equity investment firm that will provide capital and a long-term perspective on value creation. The new owners are committed to growing the fleet’s market-leading position. Financing for the acquisition and working capital has been provided by Whitney Bank.
Freeport-McMoRan (FCX) to Acquire McMoRan (MMR), Plains Exploration (PXP) for ~$9B
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX), Plains Exploration & Production Company (NYSE: PXP) and McMoRan Exploration Co. (NYSE: MMR) announced today that they have signed definitive merger agreements under which FCX will acquire PXP for approximately $6.9 billion in cash and stock and FCX will acquire MMR for approximately $3.4 billion in cash, or $2.1 billion net of 36 percent of the MMR interests currently owned by FCX and PXP. Upon closing, MMR shareholders will also receive a distribution of units in a royalty trust which will hold a 5 percent overriding royalty interest on future production in MMR’s existing shallow water ultra-deep properties.
Read more: StreetInsider.com – Freeport-McMoRan (FCX) to Acquire McMoRan (MMR), Plains Exploration (PXP) for ~$9B.
Ingleside,TX: Shell’s Olympus Hull Begins Journey to US Gulf Coast
Shell Offshore Inc.’s (Shell) Olympus hull, the approximately 32,500 metric ton main body of the Olympus TLP, departed from South Korea to begin its two month journey to the U.S. Gulf Coast.
After nearly 4 million man hours and a peak of approximately 1,300 workers on-site, construction of the Olympus hull was completed in November 2012. The hull will be transported from South Korea to Ingleside, TX on Dockwise’s world-class Blue Marlin marine vessel, a semi-submersible heavy lift ship specifically designed to transport larger equipment above the ship’s deck. The hull is expected to reach Ingleside, Texas in early 2013 where installation of the topsides will take place before the TLP departs for its final location on the Mars Field in the Gulf of Mexico.
The Mars Field, owned by Shell (71.5%) and BP (28.5%), and operated by Shell, continues to contribute to the Gulf of Mexico’s position as a critical component of the US energy supply. Discovered in 1989 and brought onto production in 1996, the Mars Field is considered one of the largest resource basins in the Gulf of Mexico. The site for the Olympus TLP, known as the Mars B development, is located about 130-miles south of New Orleans in the Mississippi Canyon and lies in approximately 3000 feet of water.
The Olympus TLP, Shell’s sixth and largest tension leg platform, will also provide process infrastructure for two of Shell’s deep water discoveries, West Boreas and South Deimos. The Mars B development is the first project of its kind to expand an existing deep water Gulf of Mexico oil field. A combination of factors produced this growth, including improved understanding of the reservoir and recovery potential due to advanced seismic and modeling technologies, and new discoveries in the Mars Field.
Subsea World News – Shell’s Olympus Hull Begins Journey to US Gulf Coast.
- Shell’s Olympus Hull on Its Way to U.S. Gulf Coast (worldmaritimenews.com)
- Canyon Offshore’s Olympic Triton Returns to the Gulf of Mexico (mb50.wordpress.com)
Gulf of Mexico: Shell Increases Stake in Habanero Offshore Field
Callon Petroleum Company (CPE) has entered into an agreement to sell its 11.25% working interest in the Habanero field (Garden Banks Block 341) to Shell Offshore Inc., the operator of the field, for a contemplated base purchase price of USD $42 million.
The effective date of this transaction will be October 1, 2012, and it is expected to close on or before December 28, 2012, subject to the exercise of preferential rights and customary closing conditions. The Company plans to use the cash proceeds from this asset divestiture, net of purchase price adjustments, to repay borrowings under its revolving credit facility.
Callon`s net interest in the Habanero field produced approximately 336 barrels of oil per day and 506 million cubic feet of natural gas per day during the month of October 2012, or approximately 8.7% of Callon`s total production for this time period. As of December 31, 2011, Callon`s net proved reserves related to the Habanero field were 1.373 million barrels of oil equivalent, with approximately 84% classified as proved undeveloped, as presented in Callon`s most recent Form 10-K.
Fred Callon, Chairman and Chief Executive Officer, commented, “We are pleased to announce another significant step in the transformation of our asset base. Pro forma for this transaction, over 50% of our total production for the month of October 2012 would have been sourced from onshore properties. In addition, the proceeds from this divestiture provide us with additional financial flexibility to execute on our growth initiatives in the Permian Basin.”
Callon Petroleum Company is engaged in the acquisition, development, exploration and operation of oil and gas properties in Texas, Louisiana and the offshore waters of the Gulf of Mexico.
Shell Increases Stake in Habanero Offshore Field (USA)| Offshore Energy Today.
- Canyon Offshore’s Olympic Triton Returns to the Gulf of Mexico (mb50.wordpress.com)
- Gulf of Mexico: Quest Offshore Sees Bright Future for Deepwater GoM (USA) (mb50.wordpress.com)
- Noble Energy Makes Oil Discovery at Big Bend Prospect in U.S. Gulf (mb50.wordpress.com)
BP: Current U.S. Gulf Operations Untouched by EPA’s Suspension
BP was quick to react after the US Environmental Protection Agency (EPA) today issued a press release in which it said that the British oil giant would be temporary banned from making new arrangements with the federal government.
In a statement issued on its website BP highlighted that the temporary suspension relates only to future potential contracts with the U.S. government and won’t affect any existing contracts the company has with the US government, including those relating to current and ongoing drilling and production operations in the Gulf of Mexico.
To remind, EPA explained the move as a necessary action“due to BP’s lack of business integrity as demonstrated by the company’s conduct with regard to the Deepwater Horizon blowout, explosion, oil spill, and response.”
The suspension will remain in force until BP can provide sufficient evidence to EPA demonstrating that it meets Federal business standards, EPA explained in its press release.
One year suspension?
In its response BP, headquartered in London, said it has already provided EPA with a statement of more than 100 pages and supplemental answers to the EPA’s questions based on that submission, to prove itself a responsible company able to do business with the government.
BP, which two weeks ago pleaded guilty for its conduct relating to the Deepwater Horizon blowout, explosion, oil spill and response, said it was notified by EPA that the suspension could be lifted soon. Some sources, such as Forbes and Federal Times claim that the ban could last for one year, while The Washington Post predicts the suspension could be in force until the end of legal proceedings related to the oil spill disaster.
BP added the company has made significant enhancements since the accident, saying that immediately after the Deepwater Horizon accident, the company launched an internal investigation, publicly released the results, made changes to the management, and has been implementing all 26 of the investigation’s recommendations.
“In the two and a half years since the Deepwater Horizon accident, the US government has granted BP more than 50 new leases in the Gulf of Mexico, where the company has been drilling safely since the government moratorium was lifted,” BP said.
Markey: Righteous Punishment
Representative Edward J. Markey today, on his blog, praised the Obama administration move: “…suspending BP’s access to contracts with our government is the right thing to do…When someone recklessly crashes a car, their license and keys are taken away. The wreckage of BP’s recklessness is still sitting at the bottom of the ocean and this kind of time out is an appropriate element of the suite of criminal, civil and economic punishments that BP should pay for their disaster.”
No BP bids
The U.S. Bureau of Ocean Energy Management today held Western Gulf of Mexico Lease Sale 229, which offered over 20 millions acres and attracted more that $133 million in high bids for the acreage in the U.S. Outer Continental Shelf (OCS) offshore Texas. Thirteen companies submitted the bids, and BP was not one of them, The Washington Post reports, citing sources close to the UK-based oil giant.
BP: Current U.S. Gulf Operations Untouched by EPA’s Suspension| Offshore Energy Today.