Category Archives: Offshore

Courtesy: The 6G ultra-deepwater drillship Platinum Explorer (Operational in 2010) owned by Vantage Drilling Inc (Private company).

Investment thesis:

The offshore drilling industry plays an important role in the oil and gas supply chain; no one can deny this basic principle even if the industry is now struggling through a strong downturn. Did you know that oil production from offshore locations represents about 29% of the global crude oil production in 2015, according to the EIA? This percentage has been nearly constant since 2005 and is expected to remain the same until 2040.

The bulk of the crude offshore production is still in the "shallow waters," which are generally cheaper and less technically challenging when compared to other offshore segments such as the deepwater and the ultra-deepwater.

However, this trend will gradually change according to Wood Mackenzie in early April 2017, who was claiming that deepwater developments are turning increasingly competitive, even compared to tight oil.

Angus Rodger, Asia-Pacific upstream research director at Wood Mackenzie, said: "We are at last beginning to see the first signs of recovery in deepwater, driven primarily by cost reduction and portfolio high-grading. Projects in the U.S. Gulf of Mexico in particular have made significant strides, with many reducing NPV15 break-evens from above $70/boe to below $50 per boe.

One important area that could help the offshore industry to survive this downturn is India offshore, which is the main topic of my article today. ONGC is active and is about to award three rigs on a three-year contract for its KG-DWN-98/2 block.

Description of the Krishna Godavari basin:

Total oil initially in place in the KG-DWN-98/2 block is estimated at 106 million cubic meters, production of only 26.71 million cubic meters is envisaged during 2019-2031.

Similarly, the gas initially in place is estimated at 69.57 billion cubic meters "BCM," of which only 51.33 BCM can be produced during 2018-34.

I - The ONGC tender.

On March 3, 2017, We learn from Upstream that ONGC is now close to award the three 3-year contracts.

Three leading international drilling contractors are poised to win three-year, deep-water rig contracts from India's Oil & Natural Gas Corporation (ONGC) for its flagship Block KG-DWN-98/2 development off the country's east coast.

ONGC requires two 1500-metre, dynamically positioned drillships or semi-submersibles in one category and a single anchor-moored rig capable of drilling in 600 meters of water in the second.

London-headquartered giant Seadrill and Singapore's Vantage Drilling are expected to win three-year rig charter contracts in the 1500-metre category, while Brazil's Queiroz Galvao Oil & Gas (QGOG) is likely to win a three-year rig contract in the 600-metre category, sources said.

On February 27, 2017, commercial bids were opened by ONGC and the results are indicated in a small table below:

Seadrill with its Subsidiarie Sevan Drilling.

Sevan Drilling ASA (SEVDR.OL) (OTCPK:SDRNF), listed on the Oslo stock exchange: Seadrill (NYSE:SDRL) owns 50.11% (14.897 million shares) of the company.

Semisubmersible Sevan Driller (2009)

Actually Ready stacked in Singapore

[Dropped out of the race]

Drillship Platinum Explorer

(2010)

Actually Ready stacked in India

Midwater Semisub Olinda Star

(1983)

Actually Ready stacked in Brazil

[Has been awarded the contract according to Upstream]

Transocean (RIG) is said to be the biggest loser in this fight for survival. The company offered no less than three drillships in the first category and one semisubmersible in the second category:

More than a dozen rigs were offered by nine contractors in the 1500-metre category.

Transocean is believed to have offered the highest bid with $166,750/d for the three drillships offered. For the second category, Transocean was the second bidder with $146,050/day (only three bidders in this category with the Semisubmersible Hakuryu-5 from Japan drilling but seems to have been disqualified?

II - New development released on May 24, 2017.

According to Upstream on May 24, 2017:

Vantage Drilling and Universal Energy have emerged as front-runners to secure three-year deep-water drilling contracts from India's Oil & Natural Gas Corporation (ONGC) after original low bidder Seadrill withdrew from the race.

State-controlled ONGC is looking for two 1500-metre, dynamically-positioned drillships or semi-submersible rigs to drill wells for its flagship Block KG-DWN-98/2 off India's east coast.

Well-placed sources said Seadrill was no longer in the race, and Vantage Drilling - which was already well placed for an award - and Universal Energy likely to win contracts.

"Seadrill is out of the fray and has declined to extend its bid validity. The second and third lowest bidders (Vantage and Universal) are expected to win, once they match the lowest dayrate," a drilling source said.

A Seadrill spokesman confirmed the company had pulled out, explaining that there were "delays in the tender process, which led to Seadrill being unable to secure the shipyard slot for the Sevan Driller to be able to meet the delivery date".

As a result, "we did not extend our bid validity", he added.

The semi-submersible Sevan Driller is now out of the race, after Seadrill declined to extend the bid validity for another two months, saying that it could not meet the delivery date in this case. The rig is actually ready stacked in Malaysia according to infieldRigs.

What next?

Drilling sources suggested ONGC is expected shortly to invite the second and the third lowest bidder for negotiations and ask them to match Seadrill's rate.

Vantage Drilling was placed a close second in the rig tender, offering an operating dayrate of $129,582 (tax inclusive) for the drillship Platinum Explorer, while Universal was third in line, quoting $138,000 for the semisub Louisiana, managed by Brazil's Petroserv Marine.

One drilling source pointed to the possibility of a re-tender, if the other bidders do not agree to match the original lowest dayrate offered by Seadrill.

However, a second source cautioned that a re-tender could lead to further delays and affect ONGC's completion schedule for KG-DWN-98/2.

Vantage Drilling Inc and Universal Energy Corp., (two privates companies) are now first and second, and will be asked by ONGC to match the $124,889 per day (tax inclusive) proposed by Seadrill. This is a total backlog including tax of about $137 million.

Note: I believe the day rate excluding the tax is about $112,000 per day.

Conclusion:

I am totally flabbergasted by the low day rate proposed here for a modern 6th generation drillship, such as the Platinum Explorer. Is it anywhere near the breakeven price? I seriously doubt it.

According to Markit index. The day rate for drillships and semisubs in May 2017 is about $200k/d. We are talking about 38% lower for ONGC?

I see it as both a blessing and a curse long term for the offshore Industry.

A blessing because three rigs will be working for the next three years, and a curse because the day rates are now basically well below breakeven prices. Rig attrition will accelerate if day rate plummet.

This is a new trend that may continue for years to come, and will eventually hurt the few remaining offshore drillers still showing an acceptable balance sheet, such as Transocean (NYSE:RIG) or Ensco (NYSE:ESV).

A dangerous unsettling issue that jeopardizes the "survivors."

Competition is naturally turning destructive. New companies are created or emerged from bankruptcy with a "fresh-start accounting" and modern attractive assets.

They become everyone'else problem.

Let's take for example Vantage Drilling International - a private company now, which emerged from bankruptcy in February 2016 - with a fleet of four Ultra-Premium Marine Pacific Class375 Jackups, and three modern 6G Ultra-Deepwater 10,000 ft & 12,000 ft Drillships.

In short, after emerging from bankruptcy, the company took care of its $2.7 billion in debt and now shows $869 million in total debt, and a cash of $232 million.

The immediate consequence is that companies such as Transocean and others who are still struggling with a large debt and did not restructure are competing unfairly with players "on steroid", who can drive the day rate to an unrealistic level and still be able to survive somehow.

However, the survivors have still a strong hand in their favor, called: Innovation.

To survive, there are several paths a rig owners can take to ensure they end up in a more viable position while the market recovers

Time will tell...

Important note: Do not forget to follow me on the offshore drilling Industry. Thank you for your support.

Disclosure: I am/we are long RIG, ESV, NE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am day trading SDRL frequently.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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2 Offshore Drillers In The Race For The OGNC 3-Year Contracts After Seadrill Drops Out - Seeking Alpha

The Offshore Multihull Association (OMA) was formed last year by the owners of performance-oriented Multihulls with the goal of promoting the growth of this exciting category of performance cruising yachts. The OMAs mission is to encourage fun, safe, close multihull racing in regattas around the world.

These multihulls initially included Gunboats, HH Catamarans, Outremer as well as custom designs built for their unique ability to cruise in comfort while still being able to race at speeds rivaling many of the fastest monohull racing yachts. The Association is open to owners of offshore-capable multihulls 45-feet and greater.

The OMA was officially launched in February of this year with the support of our inaugural sponsors, Gunboat, Morelli and Melvin, VPLP Designs, Nigel Irens Design, North Sails, HH Catamarans and Southern Spars.

The performance cruising multihull segment is one of the fastest growing segments in yachting and we are excited to launch an organization founded to support and encourage this growth, said Phil Lotz, President of the OMA, Commodore of the New York Yacht Club, and a Gunboat owner.

OMA Details Facebook

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Promoting Offshore Multihull Sailing - Scuttlebutt Sailing News

The Trump administration announced this month it is moving forward on seismic surveys in the Atlantic Ocean, the first step toward offshore drilling in a region where it has been blocked for decades. The Interior Department plans to review six applications by energy companies that were rejected in January by the Obama administration.

Environmental groups and many coastal municipalities oppose the surveys, saying loud sounds from seismic air guns could hurt marine life. Sen. David Perdue, R-Georgia, and Rep. Buddy Carter, R-Savannah, remain in favor of seismic testing and offshore drilling.

The oil and gas industry has pushed for the surveys, which map potential drilling sites for oil and natural gas. No surveys have been conducted in the mid- and south-Atlantic regions for at least 30 years. The regions, as defined by the Interior Department, stretch from northern Florida to Delaware. Any new drilling activity is expected to be limited to the coasts of Virginia, North and South Carolina and Georgia.

President Donald Trump signed an executive order last month aimed at expanding drilling in the Arctic and Atlantic oceans, part of his promise to use the nations energy reserves in an effort to reduce imports of foreign oil.

Trumps order reversed an action by former President Barack Obama and faces fierce opposition from environmental activists and many Democrats, who say seismic testing and offshore drilling harm whales, sea turtles and other marine life and that the resulting oil usage exacerbates global warming.

This is part of the administrations plan to push things forward and put the Southeast at risk again, said Sierra Weaver, a senior attorney with the Southern Environmental Law Center.

Used to locate and quantify potential oil and gas deposits, seismic testing involves firing blasts of air from large air guns toward the ocean floor for days or weeks at a time. Seismic blasts have been known to travel more than a thousand miles through the ocean, disorienting, hurting, deafening or even killing nearby marine life.

Proponents of seismic testing focus on the conclusions of a National Oceanic and Atmospheric Administration Fisheries analysis that seismic testing in the Atlantic is unlikely to harm animals at the population level.

There has been no documented scientific evidence of noise from these surveys adversely affecting marine animal populations or coastal communities, National Ocean Industries Association president Randall Luthi said.

Opponents focus on the harm that same analysis predicted would come to individual animals.

The governments own study, their own prediction of marine mammals likely to be harmed by seismic testing through 2020, is over 100,000. Thats the governments own admission that theyre likely to injure 100,000 animals. I believe the harassment numbers are well over a million, said Weaver, who also pointed out the difficulty of documenting population level harm in ocean dwelling marine mammals.

More than 75 leading marine mammal scientists signed a 2015 letter imploring the Obama administration, ultimately successfully, to reject seismic testing. A follow-up letter came last year from 28 researchers who focus on the highly endangered right whale, which migrates to the waters off Georgia and Florida each winter to give birth.

The additional stress of widespread seismic air gun surveys may well represent a tipping point for the survival of this endangered whale, contributing significantly to a decline toward extinction, they wrote.

Coastal Georgia municipalities including Savannah, Tybee Island and Brunswick have passed formal resolutions opposing offshore drilling and/or seismic testing. They are among more than 120 East Coast communities from New Jersey through Florida to do so.

With a vibrant commercial fishery industry and the only known calving ground for endangered North Atlantic right whales just off our coast, Georgians oppose seismic testing for offshore oil exploration and the risks it poses to our states wildlife, wild places, and quality of life, said Alice Keyes, vice president for coastal conservation at Coastal Georgia-based One Hundred Miles.

The decision to deny seismic permits was based on sound science, policy, and public input. One Hundred Miles represents thousands of coastal advocates who stand together to support that decision.

Georgias lawmakers in Washington continue to support exploration and drilling.

As I have always said, I believe in an all-of-the-above energy strategy and this is another step in the right direction to put people back to work, reduce energy costs and make America energy independent, said Carter, who represents every coastal county in the state and responded to an inquiry via email.

Seismic surveys have been safely used for decades around the world and are nearly daily occurrences in the Gulf of Mexico. It is done with great consideration of the marine environment with multiple safeguards in place to ensure that no harm comes to marine animals or important industries like commercial fishing.

Perdue, who lives on Sea Island, in 2015 suggested states and local communities should be involved in that process to determine the best way to unleash our full energy potential, create jobs, and make our nation more secure.

His office released this statement regarding seismic and offshore drilling: President Trump has a refreshing focus on generating jobs and unlocking our full energy potential. By approving the Keystone Pipeline and now lifting President Obamas offshore leasing ban, President Trump is moving to develop a strategic approach to Americas God given energy resources.

Seismic testing on the East Coast will require permits under the Marine Mammal Protection Act for impacts to species including dolphins and right whales before it can move forward, Weaver said. Thats an opportunity for coastal residents to weigh in.

The important thing for people to know is its time to keep speaking up for the coast, she said. And often.

The Associated Press contributed to this report.

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Trump order puts offshore exploration, drilling back on table ... - Bluffton Today

Yesterday, the Minnesota House of Representatives was debating whether or not to pass an amendment to a omnibus tax bill that would have closed offshore tax loopholes. As it stands, companies can use that loophole to avoid paying taxes in the state, which means theres more pressure on working class citizens to make up the difference.

Democratic State Rep. Paul Thissen, who supported the amendment, had a fairly straightforward question for Republican State Rep. Abigail Whelan, who opposed it: Do you think benefiting people who are hiding money in Liberia is worth raising taxes on your own constituents?

She didnt even try to answer that one.

Instead, Whelan used her time to tell everyone about Jesus.

It might be because its late and Im really tired, but Im going to take this opportunity to just share with the body something I have been grappling with over the past several months, and that is, the games that we play here.

And I just want you to know, Representative Thissen and the [Democratic] caucusI forgive you. It is okay, because I have an eternal perspective about this.

I have an eternal perspective and I want to share that with you and with the people listening at home, that at the end of the day, when we try to reach an agreement with divided government, we win some, we lose some, nobody is really happy, but you know what? Happiness and circumstancesnot what its about. There is actual joy to be found in Jesus Christ. Jesus loves you all.

If you would like to get to know him, [if] youre listening at home, [or] here in this room, please email me, call me. Would love to talk to you about Jesus. He is the hope of this state and of this country.

That that didnt answer the question. Furthermore, its completely inappropriate for an elected official to proselytize on the House floor. Christians like her would be fuming if a Muslim or atheist politician dared to do anything even close to what she did.

And then Whelan, along with every other Republican, voted to protect the offshore tax loopholes.

Its just like Jesus always said: Blessed are the corporations.

(via ThinkProgress)

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Asked About Offshore Tax Havens, MN State Rep. Tells Everyone to Accept Jesus - Patheos (blog)

(Permanent Musical Accompaniment To This Post)

Being our semi-regular weekly survey of what's goin' down in the several states where, as we know, the real work of governmentin' gets done, and where the sign on the cross is the thing you might need the most.

Last week, when we discussed some environmental crimes perpetrated on some people without the wherewithal to fight for themselves in any effective way, a Top Commenter pointed us toward a place called St. Louis, Michigan, and a sprawling case involving a defunct chemical company called Velsicol. The case is completely amazing on merits, but what makes it even more distressing is that the story isn't even close to being over. From MLive:

That was 42 years ago. In the decades since, Nyerges suffered 10 miscarriages and multiple ectopic pregnancies that she blames on exposure to polybrominated biphenyl, or PBB, an insidious poison she and 9 million other Michiganders ingested in 1973 and 1974, when a distribution snafu at a Gratiot County chemical plant contaminated the state food supply. That colossal screw-up -- accidentally switching a ton of Nutrimaster, a cattle feed supplement that boosted a cow's milk supply, with Firemaster, a toxic flame retardant -- caused one of the largest chemical poisonings in the western world. Researchers say that many in Michigan still have elevated blood PBB levels from consuming contaminated eggs, milk, butter, cheese and meat.

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Let's pause for a moment and consider the cause of this ongoing disaster: A company accidentally mixed up cattle feed with a fireproofing chemical. American business is a cockeyed wonder.

Six in 10 people tested for PBB in Michigan today -- including some born after the disaster -- have levels above the national average, according to researchers at Emory University in Georgia. Because PBB lives for decades in body fat and mimics the effects of estrogen, people directly or indirectly exposed have become prone to reproductive health issues and thyroid problems. "Among the people in Michigan, a vast majority are above the national average," said Michele Marcus, an Emory public health professor who has led the research into the long-term effects of PBB for the past 15 years.

That's 60 percent of the people in Michigan today ringing the bell on the PBB meter due to a corporation's blunder 42 years ago. And Velsicol wasn't the best corporate neighbor on its best days, of which there were very few.

Today, St. Louis is known mostly for its toxic legacy -- a chemical past that scars the very land where the plant once stood. The factory was leveled after Veliscol closed up following investigation into the PBB incident, but the property has since become one of the largest and costliest Superfund sites in the country. Under the grass, beneath a clay cap behind a chain link fence, are huge amounts of hazardous chemicals in concentrations that could pose a major health risk to humans and wildlife. Total cleanup is estimated to cost between $300 million and half a billion, paid for almost entirely by taxpayers. "It's essentially going to be there forever," said Jane Keon, a local resident and founding member of the Pine River Superfund Citizen Task Force, which has advocated for cleanup and research on behalf of those exposed to Velsicol's PBB. Although Velsicol exported its infamous contamination to nearly every refrigerator in Michigan, the company also did a number on the community that supplied its workforce. Production of PBB caused so much dust pollution that Velsicol moved its research lab to Alma College to find clean space to work. On the ecological end, natural topography meant the Pine River received the brunt of toxic drainage and erosion from the factory.

Of course, things being the way they are, in 1982, the company managed to skate through bankruptcy protections. This protected the company, but not the people in the town.

While the company was going bankrupt in 1982, Veliscol and the U.S. Environmental Protection Agency signed an agreement that provided $20 million for cleanup, a pittance of the eventual cost. Nonetheless, a slurry wall was built around the perimeter and a cap was placed over the site. But there was nothing underneath to keep the buried chemicals out of the local water. The encapsulation proved to be an utter failure. The slurry wall leaks in major areas and the EPA had to install a groundwater trench around the site that collects 20,000 gallons a week, which is shipped to Detroit for treatment. In 1999, a 10-year, $100 million project began to remove 750,000 cubic yards of contaminated sediment from 36-acres of the riverbed across from the site. Last summer, the EPA began digging up yards and replacing soil in the 9-block neighborhood bordering the site. Crews hauled away 50,000 tons of soil contaminated mostly with dichloro-diphenyl-trichloroethane, or DDT, a pesticide once widely used to control malaria, typhus, and the other insect-borne diseases.

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Leading to, inevitably

Taxpayers are funding the work now. Velsicol shed its liability for St. Louis long ago. The company is now owned by Arsenal Capital, a private equity firm. Chemtura Corp. now owns the patent on Firemaster, which is made with a slightly different chemical composition. More St. Louis yard dig-ups are scheduled this year. The EPA plans to start in-situ thermal treatment (sticking electrified rods into the ground to boil off chemicals) at some point. Work on that could happen this year if EPA higher-ups allocate money for construction.

Returning to today, we discover that the proposed Trump budget cuts the Environmental Protection Agency's budget, including the SuperFund program, by 31 percent. This is the way the world works. This is the way things get rigged.

Beep Beep Here Comes America

We move on up to Minnesota, where a state representative opposed an amendment aimed at shuttering offshore tax loopholes on the grounds that Jesus saves, and probably in the Caymans. From ThinkProgress:

It might be because it's late and I'm really tired, but I'm going to take this opportunity to share with the body something I have been grappling with over the past several months, and that is, the games that we play here," she began, leaving the tax haven discussion in the dust. "I just want you to know, Representative Thissen and the [Democratic] caucusI forgive you, it is okay, because I have an eternal perspective about this ...There is actual joy to be found in Jesus Christ, Jesus loves you all. If you would like to get to know him, you're listening at home, here in this room, please email, call me, would love to talk to you about Jesus, he is the hope of this state and this country.

I'm not entirely sure about parliamentary procedure here, but I don't think this motion is in order.

And we conclude, as is our custom, in the great state of Oklahoma, where Blog Official Sagebrush Topiary Sculptor Friedman of the Plains brings us a nifty bit of legislative legerdemain. From NewsOK:

State lawmakers have been talking for months about levying a $1.50 per pack tax on cigarette sales, but have been unable to gather enough votes to pass the measure in the House. By making the revenue-generating measure a fee rather than a tax, legislative leaders believe only a majority vote would be needed for passage rather than a three-fourths supermajority. Efforts to avoid the three-fourths majority vote requirement also are behind the decision to turn to a 1.25 percent state sales tax on motor vehicle sales.

If you call a tax a fee, then you can run on not raising taxes. And, if you call it an clair, you can have it for dessert. The English language was not designed for politics.

This is your democracy, America. Cherish it.

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Jesus Saves, and Probably in the Cayman Islands - Esquire.com

On April 28, President Donald Trump signed an executive order that overturned restrictions on and could potentially expand offshore drilling and seismic testing in several bodies of water in the U.S. including middle and southern parts of the Atlantic Ocean.

S.C. officials including Governor Henry McMasters and U.S. House Representatives Mark Sanford, Tom Rice, and Jim Clyburn have all taken stances opposing drilling on the states coast.

On Saturday, at a press conference in Plyler Park in Myrtle Beach organized by local activist groups Stop Offshore Drilling in the Atlantic (SODA) and the Surfrider Foundation, local officials spoke out against the potential dangers of drilling and seismic testing for oil and gas on the S.C. coast.

Previously, Myrtle Beach Mayor John Rhodes, North Myrtle Beach Mayor Marilyn Hatley, and mayor of the City of Georgetown Jack Scoville spoke out against the Trump administrations decision at a similar conference, all agreeing offshore drilling and seismic testing could severely damage the coastal economy.

Myrtle Beach city councilman Wayne Gray echoed their sentiments, reminding attendees of the resolution the city passed a few years ago that opposed offshore drilling and seismic testing along the coast of the state.

I think that all of our council members realize and understand the importance of the tourism economy one in ten jobs [in S.C.] are either directly or indirectly related or associated with tourism, he said.

Over a billion dollars of federal, local, and state taxes are collected via the tourism industry that pays for our schools, our roads, and our quality of lifeso any loss to that tourism economy would be devastating and impactful for South Carolina.

Gray also stated that the tourism industry, proportionally, was even more vital to the S.C. economy than to the economy of other states including California, Virginia, and Florida, adding that he and other officials would continue discussing the issue with state and federal legislators.

Surfside Beach town councilwoman Julie Samples agreed with Grays remarks, adding that a cataclysmic event such as the Deepwater Horizon oil spill in 2010 could be devastating for the Grand Strand.

Simple factexploratory and commercial drilling, extraction, and transportation of offshore oil and gas resources poses significant risk of a spill, she said.

We need to be good stewards of our coastal environment and its resources, not only because of the economic and ecological impact on our area, but because we have a responsibility to the many people who call this place home.

Directly following the press conference, dozens of attendees and tourists united in joining hands on the beach near the Skywheel as an act of protest. The event, dubbed Hands Across the Sand was one of hundreds of synchronized events held across the globe to raise awareness concerning the dangers from offshore blasting and drilling for oil and gas.

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More officials speak out against offshore drilling and seismic testing in the Atlantic - Myhorrynews

The US' one and only offshore wind project, Block Island

"It's good the US is the way it is it is the states that will make the decisions," said Alla Weinstein, founder of Trident Winds, which has submitted an unsolicited lease for afloating project off Morro Bay, California.

She noted California's current RPS of 50% renewables, which may be upped to a goal of 100%, is the sort of state-led policy that will create certainty for an offshore supply chain.

There was agreement that it would be a mistake to for states to compete against each other. They should cooperate regionally, said the panelists. "That is the number one lesson to learn from the European experience," said Weinstein.

Europe's offshore industry was not helped by having different countries competing, they said. "States will have to cooperate and not go after so much local content in the beginning," agreed Clint Johnson, senior vice president at DNV GL.

Panelists were optimistic about the potential in the US offshore market because of the recent ORECs approved in Maryland, Massachusetts' upcoming solicitation for 1.6GW of offshore wind and the development activity and policy-making in New York.

"The US is the sleeping giant that is about to wake up," said Adam Thomsen, head of US growth implementation at MHI Vestas.

He even predicted the US will be the world's largest offshore market after Europe. "The momentum is real the states in the north-east have stepped up," added DNV GL's Johnson.

"The US has moved quite a lot up our list of priorities," said Tim Fischer, vice-director of Ramboll Wind.

Make has projected that there will be roughly 2.2GW of offshore wind in the US by 2026, Fischer noted. But there will have to be "more than that" to justify a supply chain, said MHI Vestas' Thomsen.

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AWEA 2017: States to lead the way offshore - Windpower Monthly (subscription)

After almost three years of flagging demand, offshore drillers are seeing the first signs of a turnaround. Down over 40% from its cyclical peak, global offshore rig count appears near bottom. And bidding activity for future work is accelerating as both drillers and operators recalibrate to make projects work at lower commodity prices.

Not all of the emerging work will be high day-rate in nature. In the short term, well interventions, sidetracks, and plug and abandonments will represent more demand than usual. Longer term, more lucrative term drilling will be driven by still-materializing cost reductions, including savings from standardization and smarter preventative maintenance programs.

Even a modest upturn will be welcome. After OPEC's decision to open the spigots in 2014, drillers scrambled to adjust to the abrupt change in market conditions. News of reorganizations, asset sales, fleet reductions, rig-delivery delays, and recapitalizations came to dominate the sector. On average, share prices of the largest providers fell a staggering 79% over the period.

The segment still faces headwinds. Day rates will remain under pressure at least through 2017. And offshore discoveries - the lifeblood of future drilling - are down almost 60% from 2014 levels. Offshore reserve additions totaled only 2.4 billion barrels last year.

While these factors auger well for oil prices longer term, they suggest more tepid demand growth in the mean time. For projects that do materialize, new rigs coming out of shipyards will ensure competition remains stiff.

Still, some contractors will benefit more than others as offshore work increases. The following metrics and resulting scoreboard can help determine which are best positioned:

Stock-price Performance: The ability of a driller to operate effectively during times of change is important. Stock-price performance since Q2 2014 is a proxy for how companies handled the steep decline in oil prices.

Return on Assets: ROA measures the effectiveness of a company's management, strategy and operations. While ROA can vary based on how aggressively a driller retires or writes down assets, it's worth watching.

Debt-to-Equity Ratio: A high debt-to-equity (D/E) ratio limits flexibility. Moreover, management teams focused on servicing debt are less focused on other aspects of the business.

Backlog Ratio: This measures backlog relative to the book value of a driller's fixed assets (mostly rigs). A higher ratio connotes greater visibility to the business. The ratio is a financial proxy for customer preference and faith in a driller.

Customer Satisfaction: EnergyPoint Research's independent customer satisfaction scores can be strong indicators of future financial performance. The reasons are self-evident: customers contract with their preferred drillers more often, for longer periods and at higher rates.

Customer Satisfaction Trends: Market changes affect performance. This metric captures driller trends in customer satisfaction since oil prices began weakening in Q2 2014.

The scoreboard's "INDEX" column is the average of driller rankings across the six metrics. Customer satisfaction metrics receiving double weighting. The results suggest Ensco (NYSE:ESV) and Noble (NYSE:NE) are currently the best positioned for an upturn. Transocean (NYSE:RIG), Diamond Offshore (NYSE:DO), and Rowan (NYSE:RDC) follow.

Ensco and Noble outperform in customer satisfaction, while Transocean and Diamond benefit from strong backlogs. Leading ROA and stock-price performance, as well as balance-sheet strength, drive Rowan's standing.

Atwood Oceanic's (NYSE:ATW) scorecard is burdened by its customer satisfaction trend and lower ROA. However, the company retains low leverage and the resources to rebound. Seadrill's (NYSE:SDRL) metrics reflect a company in distress with rankings in the bottom half of each dimension.

So, why overweight customer satisfaction? Because when customer satisfaction moves in a particular direction, operational and financial performance tend to follow.

As a general rule, customer perception of a driller's job quality, performance and reliability, and service and professionalism go a long way toward predicting overall customer satisfaction. Although drillers as a group have done a relatively good job in these areas, there is room for improvement for individual drillers.

Below are the key customer satisfaction dimensions for offshore drillers and why they matter:

Job Quality: A measure of organizational and procedural effectiveness. Job quality influences overall satisfaction because is reflects whether contractors meet expectations.

Performance and Reliability: Performance and reliability measures the dependability of personnel and assets. Contractors that proactively address shortfalls enjoy greater customer loyalty.

Service and Professionalism: Highly rated contractors tend to be more selective in their hiring and have higher rates of employee retention. A drive to maintain long-term customer relationships is also pervasive in these companies.

Few can say what the future holds precisely for offshore drillers. However, with conditions improving, it's a good bet drillers mastering the things that matter to customers will see their opportunities grow and financial results outperform.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: My firm, EnergyPoint Research, does and/or seeks to provide for-fee data subscriptions to oil and gas industry participants, investors and other stakeholders, including companies covered in its posts, reports, articles and surveys.

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Offshore Drillers Begin To Emerge From Stormy Seas - Seeking Alpha

A former Louisiana state official with ties to former Gov. Bobby Jindal was appointed Monday to lead the Interior Department's top safety agency for offshore oil and natural gas drilling.

Interior Secretary Ryan Zinke announced that Scott Angelle will lead the Bureau of Safety and Environmental Enforcement. Angelle was recently the vice chairman of the Louisiana state utility and public service regulator, with plenty of experience overseeing the Gulf Coast state's enormous energy industry. He was appointed by Jindal to serve as the state's liaison to Washington for the 2010 BP oil spill that killed nearly a dozen workers and led to the creation of the agency he will now head.

Angelle will jump into his role immediately, with his first day on the job being Tuesday, the agency said.

"Scott Angelle brings a wealth of experience to BSEE, having spent many years working for the safe and efficient energy production of both Louisiana's and our country's offshore resources," Zinke said. "As we set our path towards energy dominance, I am confident that Scott has the expertise, vision and the leadership necessary to effectively enhance our program, and to promote the safe and environmentally responsible exploration, development and production of our country's offshore oil and gas resources."

Angelle's post will be critical to expanding drilling under President Trump's offshore energy policy and recently signed an executive order directing Zinke to expand energy exploration off the Arctic and Atlantic coasts.

Zinke still has to fill the top position at the Bureau of Ocean Energy Management, which is the complimentary agency to BSEE, also created in the wake of the BP disaster. Zinke has the authority to choose the directors of both bureaus without the president having to nominate them. Both will be needed to achieve the president's offshore energy goals.

The energy industry applauded Zinke's choice. "Angelle's unique combination of political acumen, experience and knowledge of the offshore industry make him an excellent choice to lead BSEE," said National Ocean Industries Association President Randall Luthi.

Luthi added that "he will no doubt add some Cajun spice to the BSEE hallway at the Main Interior Building in Washington, D.C."

Angelle said he welcomed an opportunity to serve Trump and Zinke, "and work with BSEE staff to meet the critical goal of energy dominance for our country."

Here is the original post:

Former Jindal official appointed to key offshore energy post - Washington Examiner

US president Donald Trump has trimmed funding for offshore renewable energy activities in the proposed $11.7bn 2018 budget for the Interior Department.

However the administration will continue to pursue an all-of-the-above energy strategy, including oil and gas and renewable energy, Interior Secretary Ryan Zinke said today on a conference call with reporters.

Well develop (energy resources) in a responsible way and being accountable on our nations lands and waters, said Zinke.

The department oversees one-fifth of the country's land and the entire outer continental shelf.

Interiors budget allocates $791m toward the America First national energy goals, including $189m for onshore oil, gas and coal programs and $343m for offshore oil and gas development.

The $171m budget for the Bureau of Ocean Energy Management, which manages offshore energy and mineral resources, includes $21.7m for renewable energy activities, a $2.7m drop from 2017.

BOEM has held seven competitive wind energy auctions and issued leases offshore Delaware, Maryland, Massachusetts, New Jersey, New York, Rhode Island, Virginia and North Carolina.

The agency is in the planning stages for additional wind leasing off the coast of the Carolinas and has received unsolicited lease requests from two companies seeking to develop areas located offshore New York and Massachusetts.

Along the Pacific coast, BOEM is considering unsolicited lease requests in Hawaii and California.

Due to ongoing interagency discussions and other funding priorities, the 2018 budget proposes to delay the Hawaii lease sale.

Image: Gage Skidmore

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Trump trims offshore spending - reNews