Slow Gulf Repairs Mean Visibility
This column was originally published on RealMoney on Nov. 4 at 2:03 p.m. EST. It's being republished as a bonus for TheStreet.com readers.
The Gulf of Mexico is coming back.
The Mineral Management Service -- the government arm that measures oil and gas production in the Gulf -- said Thursday that daily production received a big boost: Shut-in oil output declined to 790,610 barrels a day, or 52.7% of total Gulf output, down from 63.9% on Wednesday, and shut-in natural gas production decreased to 4.726 billion cubic feet a day, or 47.3% of daily output, a big improvement from 50.4% on Wednesday.
Still, the impact of hurricane season is significant. More than 77 million barrels of oil production have been lost as a result of Hurricane Katrina and Hurricane Rita, equaling more than 14% of the annual Gulf production. Lost natural gas production totals more than 396 billion cubic feet, almost 11% of annual production.And problems remain: A whopping 207 offshore platforms remained unattended since Katrina, explaining why 50% of oil and natural gas production remains offline since late August. While Thursday's improvements provide some hope that production will begin to come back more rapidly than it has over the past two months, comments from oil and gas executives are much less sanguine.
Repairs Into 2007While I expect to see more and more production coming back online in the Gulf of Mexico, the region is likely remain challenged for months to come. Executives from Gulf of Mexico boat purveyor Hornbeck Offshore (HOS) suggest that they see work related to the storms likely to last throughout next year. Other companies such as Tetra Technologies (TTI) and Superior Energy Services (SPN) suggest that business for well remediation is strong. Oceaneering International (OII), the largest operator of remotely operated vehicles, or ROVs, that inspect platforms and pipelines underwater, raised guidance for 2006 as a result of an abundance of work related to the hurricanes. "The 2006 EPS growth is anticipated to be driven by profit improvements from our oilfield Subsea Products, particularly our umbilical manufacturing operation, current prospects for higher ROV pricing and a larger fleet size, and an expected increased level of Subsea Projects profitability due to Hurricanes Katrina and Rita repair work," said Oceaneering CEO John Huff.
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