Investing In Offshore Oil Drilling Companies

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By Guest Author: Robert Williams, PhD, P.E.

This oil and gas industry perspective highlights only US-quoted drilling companies that provide offshore drilling activities in the ongoing search for that elusive black gold. There are a staggering number of different types of drilling rigs in operation around the globe and this summary is only for major US companies and does not include the independent drillers. Other UK, Norwegian, Danish, Japanese and many other countries have similar quantities of drilling rigs in operation on a global basis.

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Before drilling begins, oil/gas companies will conduct geological surveys of an area to determine the potential for oil or gas deposits and to identify specific drilling targets. Geologic survey companies will be the subject of a future oil/gas industry perspective.

The oil/gas company chooses the location and supervises the operation, which may take as little as 15 days or as long as 12 months, of round-the-clock, seven-days-per-week operation to drill a single well depending on the complexity of the project. Drilling is for two basic types of wells—exploratory (to find new oil or gas deposits) and development (to prepare the discovery for production). Water depths range from 20 to 400 feet for jack-up rigs to up to 10,000 feet for semi-submersibles and drill-ships

Drilling rigs generally consist of engines, a draw-works, a derrick (tower), and pumps to circulate the drilling fluid (mud) under various pressures, blowout preventers, drill string and related equipment. The engines power the different pieces of equipment, including a rotary table or top drive that turns the drill string, causing the drill bit to bore through the subsurface rock layers. Rock cuttings are carried to the surface by the circulating drilling fluid. The intended well depth, bore hole diameter and drilling site conditions are the principal factors that determine the size and type of rig most suitable for a particular drilling job.  Draw works is the mechanical section that contains the spool, whose main function is to reel in/out the drill line to raise/lower the traveling block.

The following is a brief summary of the types of drilling rigs involved…

1) Jack-up rigs stand on the ocean floor with their hull and drilling equipment elevated above the water on leg supports. Jack-up rigs are used in water depths of 400 feet or less to provide stable drilling. At the drilling site, the legs are lowered and the hull is jacked up on the legs to the desired elevation above the water. The hull then serves as a drilling platform. After the well is completed, the hull is lowered into the water, the legs are elevated and the rig is towed to the next drilling site. Most jack-up rigs are equipped with cantilevers that allow the drilling equipment to extend outward from the hull over fixed platforms enabling drilling of both exploratory and development wells. The jack-up rig hull supports the drilling equipment, jacking system, crew quarters, storage and loading facilities, helicopter landing pad and related equipment.

2) Semi-submersible rigs are floating offshore drilling units with pontoons and columns that, when sea water is controlled to enter, cause the units to be partially submerged to a predetermined depth. Semi-submersible rigs can be held in a fixed location over the ocean floor either by being anchored to the sea bottom with mooring chains or dynamically positioned by computer-controlled thrusters. Semi-submersibles do not rest on the sea floor like jack-up rigs. Instead, the working deck sits atop giant pontoons and hollow columns. These float high in the water when the rig is moved. At the drill site, the crew pumps seawater into the pontoons and columns to partially submerge the rig, hence the name semi-submersible. With much of its bulk below the water’s surface, the semi-submersible becomes a stable platform for drilling, moving only slightly with wind and currents.  Like jack-ups, most semi-submersibles are towed to the drill site.

3) Drill-ships are specially built seagoing vessels that drill in waters as deep as 10,000 feet. Drilling equipment is installed on the deck, with the derrick normally placed in the middle of the ship. The well is drilled through an opening (called a “moon pool”) that extends to the water’s surface below the derrick. Because of their cargo-carrying capacity and exceptional mobility, drill-ships are especially useful for drilling exploratory wells. Although they are not as stable as semi-submersibles in rough water, they can be moved from location to location much faster. They maintain their position through mooring or dynamic positioning systems.

4) Barge rigs are towed to the drilling location and are held in place by anchors while drilling activities are conducted. The barge rigs has the crew quarters, storage facilities and related equipment mounted on the floating barge, with the drilling equipment cantilevered from the stern of the barge. When moved from one location to another, the barge floats; when stationed on the drill or work-over site, the barge is submerged to rest on the bottom. Typically, inland barge rigs are used to drill or work-over wells in marshes, shallow inland bays and offshore where the water covering the drill site is not too deep; barge rigs can operate at depths between three and 25 feet.

Jack-up daily rates are of the order of $70,000 to $150,000 whereas drill-ships and semi-submersibles charge daily rates of $250,000 to $400,000.

ATW – ATWOOD OCEANICS, INC is engaged in the business of international offshore drilling of exploratory and developmental oil and gas wells. ATW conducts drilling operations in most of the major offshore exploration areas of the world including: Arabian Gulf, Red Sea, Black Sea, Australia, East and West Africa, Southeast Asia, China, Far East, Papua New Guinea, India, Mediterranean Sea, Central and South America and the U.S. Gulf of Mexico.

>>> Click Here For More Atwood Oceanics Analysis

ATW fleet consists of eight active drilling units, which includes three semi-submersibles capable of drilling in up to 5,000 feet of water, one semi-submersible capable of drilling in up to 2,000 feet of water, one 400 feet cantilever jack-up, one 300 feet cantilever jack-up, one semi-submersible self-erecting tender-assist rig, and one submersible.

DO – Diamond Offshore Drilling, Inc. is a global offshore oil and gas drilling contractor. DO’s fleet consists of 30 semisubmersibles, 14 jack-ups and one drillship. DO offer a range of services worldwide including deep water, harsh environment, conventional semisubmersible and jack-up markets. One of DO’s significant customers is Petroleo Brasileiro (PBR) (see previous oil/gas industry perspective) accounting for over 10% of its annual total revenues. DO provides contract drilling services to the energy industry around the globe and is a leader in deepwater drilling in harsh environments such as the North Sea, the Gulf of Alaska, the Straits of Magellan, the south China Sea and Australia’s Bass Strait.

>>> Click Here For More Diamond Offshore Analysis

ESV Ensco International Inc. provides offshore contract drilling services to the international oil and gas industry and they operate a fleet of 46 drilling rigs, including 43 jack-up rigs, two ultra-deepwater semi-submersible rigs and one barge rig. Additionally, six ultra-deepwater semisubmersible rigs are under construction. Two semi-submersible rigs, as well as the additional six semi-submersible rigs under construction, are ultra-deepwater semi-submersible rigs, capable of drilling at depths of 8,000 feet or greater.

>>> Click Here For More Ensco Analysis

HERO – Hercules Offshore, Inc. provides shallow-water drilling and marine services to the oil and natural gas exploration and production industry in the United States, Gulf of Mexico and internationally. The Company provides these services to integrated energy companies, independent oil and natural gas operators and national oil companies. The Company operates in six business segments: Domestic Offshore, International Offshore, Inland, Domestic Lift-boats, International Lift-boats and Delta Towing.

>>> Click Here For More Hercules Offshore Analysis

HP – Helmerich & Payne, Inc. is primarily engaged in contract drilling of oil and gas wells for others. The Company’s contract drilling business is composed of three business segments: United States land drilling, offshore drilling and international land drilling. The Company’s United States land drilling is conducted primarily in Oklahoma, California, Texas, Wyoming, Colorado, Louisiana, Mississippi, Alabama, Utah, Arkansas, New Mexico and North Dakota. Offshore drilling operations are conducted in the Gulf of Mexico, and offshore of California, Trinidad and Equatorial Guinea. In 2008, the Company acquired TerraVici Drilling Solutions, Inc.

>>> Click Here For More Helmerich & Payne Analysis

NBR – Nabors Industries operates approximately 528 land drilling and approximately 763 land work-over and well-servicing rigs in North America. NBR’s offshore fleet consists of 37 platform rigs, 13 jack-up units and 3 barge rigs in the United States and multiple international markets. NBR also manufactures top drives and drilling instrumentation systems and provides oilfield hauling, engineering, civil construction, logistics and facilities maintenance and project management services.

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>>> Click Here For More Nabors Industries Analysis

NE – Noble Corporation is a leading provider of diversified drilling services for the oil and gas industry. The Company performs contract drilling services with its fleet of 63 mobile offshore drilling units located in the U.S. Gulf of Mexico, Middle East, Mexico, the North Sea, Brazil, West Africa and India including five rigs under construction. NE has acquired five jack-up rigs and two semi-submersible rigs, plus the Company has options to purchase two additional premium jack-ups. In addition, NE has mobilized 9 jack-up rigs from the U.S Gulf of Mexico to international markets.

>>> Click Here For More Noble Analysis

PDE – Pride International is one of the largest drilling contractors which provides contract drilling and related services to oil and gas companies worldwide including West Africa (Angola), Latin America (Brazil), the Gulf of Mexico, the Middle East and India with a total of 44 rigs distributed as follows: West and South Africa: 2 ultra-deepwater, dynamically positioned drill-ships, 1 deep water semi-submersible, 3 mid-water semi-submersibles, 1 jack-up rig and 1 managed deep water platform ; South America: 4 deepwater, dynamically positioned semisubmersibles and 3 mid water semi submersibles; U.S. – Gulf of Mexico: 14 jack-up rigs and 2 managed deep water platforms ; Mexico – Gulf of Mexico: 8 jack-up rigs; Middle East: 1 deepwater semisubmersible and 2 jack-up rigs; India: 2 jack-up rigs and under construction in Korea 4 ultra-deep water drill-ships. For example, Pride Africa, a dynamically-positioned deepwater drillship operates in 10,000 ft. deep water and with drill depths to 30,000 feet.

>>> Click Here For More Pride Intl Analysis

RDC – Rowan Companies, Inc. is a major provider of international and domestic contract drilling services and utilizes a fleet of 22 jack-up rigs and 30 deep-well land rigs. Jack-up rigs are used for both exploratory and development drilling and depending on the particular rig and location, RDC have the capability of drilling to depths of up to 35,000 feet in water up to 550 feet deep.  Seven new jack-up rigs are under construction with delivery expected in 2009, 2010 and 2011.

>>> Click Here For More Rowan Companies Analysis

RIG – Transocean Ltd. is an offshore drilling contractor providing services from shallow water to the ultra-deepwater with 136 mobile offshore drilling units, plus an additional eight new-build rigs, 65 jack-up rigs and 68 drill-ships and semisubmersible rigs RIG provides drilling rigs for all types of petroleum companies in offshore drilling markets that include the U.S. Gulf of Mexico and eastern Canada, Brazil, the U.K. and Norwegian sectors of the North Sea, West Africa, Asia, including Australia, the Middle East, including Saudi Arabia, India and the Mediterranean.

>>> Click Here For More Transocean Analysis

VTG – Vantage Drilling Company is a development-stage international provider of offshore contract drilling services for oil and gas wells who operate one ultra-premium jack-up rig in Southeast Asia and has three ultra-premium jack-up rigs under construction. VTG has an agreement to acquire 45% ownership in an ultra-deepwater drillship. In addition, VTG manages two ultra deepwater drill-ships and one ultra deepwater semi-submersible, all of which are under construction, pursuant to construction supervision and management agreements.

>>> Click Here For More Vantage Drilling Analysis

Author has no current investment in these stocks and provides only the who, what, where, why but not the when to invest which is up to the reader’s individual strategic stock trading plan.

Author Bio

Robert is a valued contributor to Self Investors and provides great insight into the oil industry.  He has 40 years of experience which includes oil/gas engineering in crude oil/petroleum products/natural gas, refining, processing and pipelines on all continents, except South America and Antarctica, from Alaska and Australia pipelines to S.E. Asia offshore, from UK North Sea to Los Angeles fuel truck racks and from Romanian pipelines to West Africa FPSO.

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