This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Going Deep in Shallow Water

Soaring oil prices have sparked a boom in the Gulf of Mexico. Rig-rental rates are skyrocketing, employees are in short supply and property prices are climbing.

Yet one part of the gulf has missed the boom: the shallow, coastal waters.

Big oil companies, lured by the promise of larger reserves and easier drilling, are fleeing these areas and moving onshore and out to deeper waters. The gulf's shallow waters have fallen out of favor because of their aging fields, declining production and annual hurricane risk. Lofty oil prices have made drilling in deep water and the continental U.S. more lucrative and offset the higher expenses of drilling in unconventional areas.

That's spawned a land rush among small independent drillers with an appetite for risk. Over the past year, the pace of big operators leaving the gulf's shelf, where water depths are 1,000 feet or shallower, has surged along with energy prices. And that's meant more deals for small companies eager to bet big.

Over the past two years, 13 companies have cast off their shallow-water assets, nearly triple the number in deep water. In April, Noble Energy (NBL) announced it was selling almost all of its shallow-water fields to privately held Coldren Resources for $625 million. BP (BP) shed its remaining fields on the shelf for $1.3 billion in cash to Apache Energy (APA), and Pogo Producing (PPP) sold a 50% stake to Mitsui (MITSY) for $500 million.

Earlier this year, Kerr-McGee (KMG) and Houston Exploration (THX) each dumped their properties for a total of $2.1 billion to W&T Offshore and Merit Energy, respectively.

To be sure, the exodus has been partly inspired by the extensive damage oil companies suffered after hurricanes hit 113 offshore platforms and 457 pipelines last fall, shutting down much of the gulf's petroleum industry. Millions of dollars in damages boosted insurance rates and pressured oil companies to reconsider their strategy in the gulf. Well over a month after the start of the hurricane season, 12% of the area's daily oil production and 9% of its gas output remains offline.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs