For Immediate Release: Contact: Nicolette Nye
Friday, June 11, 2010 (202) 347-6900
NOIA Member Companies Feel Impacts of Drilling Moratorium,
Applauds Landrieu’s Efforts to Save Jobs
WASHINGTON, DC – The decision to halt deep water exploration activity and the uncertain status of shallow water operations in the Gulf of Mexico is already having profound impacts on the offshore energy industry, and these impacts will only worsen the longer the pause continues. Since the Gulf region depends on the offshore industry for thousands of jobs and billions of dollars in revenue, the impacts of the “one size fits all” moratorium will add further job loss and economic woes to a region already suffering from these same hits to its seafood and tourism industries.
Fearing that the blanket drilling moratorium “could exacerbate, rather than alleviate, the impacts of this spill upon both our economy and our environment,” U.S. Senator Mary Landrieu of Louisiana has sent a letter to the President requesting that the blanket moratorium on drilling be lifted. In a June 11 letter the Senator wrote, “The immediate impacts to the economy are devastating enough: idling the 33 rigs currently permitted to drill in the deepwater Gulf would immediately impact employment for roughly 38,000 crewmen, deck hands, engineers, welders, ROV operators, caterers, helicopter pilots, and others who operate and service these vessels. That’s like closing 12 large motor vehicle assembly plants in one state, all at once”.
NOIA strongly echoes the Senator’s sentiments and applauds her efforts to look at the full scope of interwoven industries and communities that make the Gulf of Mexico economy strong. We plan to continue working with the Senator to ensure that jobs and revenues in the region aren’t an unintended casualty of the response to the Deepwater Horizon spill.
NOIA member companies are feeling the impact of the blanket moratorium, and several share their stories below:
- Aker Solutions is a leading global provider of engineering and construction services, technology products and integrated solutions to the offshore oil and gas industry.
- The moratorium will impact Aker Solutions' offshore related operations on the Gulf Coast which include about 750 employees in Texas and Alabama.
- The company has already started to refocus their efforts to international projects that hopefully can replace some of the void.
- Some of their offshore services work is coming to a halt already; and unless they can refocus that workforce, including vessels and tools, to international projects they are at risk of losing jobs in Texas over the next few months.
- Manufacturing jobs in Alabama are at risk from early 2011, as the backlog runs out with no new orders of deepwater subsea equipment coming in.
- Engineering jobs in Houston are at risk of being reduced, but may be able to be refocused internationally.
- In summary, part of their workforce will be affected directly or indirectly by the moratorium. Their goal is to try to mitigate this by securing international projects.
ATP Oil & Gas Corporation
- ATP Oil & Gas Corporation is an independent oil and gas producer headquartered in Houston, Texas.
- The moratorium has caused ATP to stop the drilling of a natural gas development well (the Mississippi Canyon 305 # 2 well) and release the deepwater drilling rig. The MC 305 #2 well would have produced approximately 40 million cubic feet of gas per day with a very small amount of condensate.
- Additionally, ATP will not be able to drill and complete two development wells (MC 941 #4 well and MC 942 # 2 well) using a drilling configuration with two blowout prevention (BOP) stacks, one on the seafloor and one at the surface. This is a new design for improved safety, a first in the US Gulf of Mexico and one that the company planned 3 years ago.
- These wells were originally planned to be completed and placed on production in 2010 at a combined rate of approximately 14,000 barrels of oil per day using a platform drilling rig attached to the ATP Titan platform.
- As a result of the moratorium and the suspension of operations, ATP expects to incur additional costs of approximately $30,000,000 that otherwise would not have been spent.
- Additionally, ATP will defer revenues of more than $1,000,000 per day as a result of not being able to drill and complete the development wells planned for 2010.
Bollinger Shipyards, Inc.
- Bollinger Shipyards, Inc. and its affiliated companies are the leading provider of quality marine construction, repair and conversion products, servicing both the military and commercial marine industry. They also own and operate a fleet of Offshore Supply Vessels that service the deepwater activities of the OCS. Family owned and operated since 1946, Bollinger Shipyards employs 3,000 people.
- “In the 64 years of our existence, we have never been faced with such an uncertain future. This moratorium has created an environment leaving Bollinger Shipyards no choice but to downsize our company thereby eliminating good paying jobs.”
- Broadpoint is a 27 year old privately held company with a 100 employees based along the Gulf Coast with its headquarters in Houston and a Network Operations Center in New Orleans with an additional office in Lafayette, LA.
- Their operations are 99% directly related to providing telecommunication services in the Gulf of Mexico through satellite communications and the ownership and management of a 100,000 square mile GSM/GPRS/Edge network operating in the Gulf.
- Broadpoint and its clients will be adversely affected as a result of this shutdown and it will directly affect their ability to operate. Reliable communications is essential for the health and safety of individuals in the Gulf of Mexico.
CapRock Communications, Inc.
- CapRock Communications is a 29 year old privately held company employing 750 employees globally with headquarters in Houston and operational offices in Lafayette and New Orleans, LA.
- Their operations are related to providing satellite communication solutions that enable the oil and gas industry to operate more efficiently in today's environment, serving the communications needs of rig owners, service companies and operators working on drilling rigs, production platforms and other assets in the Gulf.
- They currently have over 50 field service and operations personnel supporting clients in the Gulf of Mexico and this shutdown will directly impact their ability to maintain operations.
- Their field service personnel install and manage communication systems onboard drilling rigs and energy support vessels throughout the Gulf of Mexico. As their customers are now required to cease or limit their operations, the amount of business their company receives and the work they have for their personnel in the region significantly declines.
- They will be forced to redeploy personnel to different regions or support them in finding other opportunities.
C&C Technologies, Inc.
- C & C provides a wide range of survey and mapping services for the land and offshore oil and gas industry, the telecommunications industry and the U.S. government.
- C&C expects to lay off approximately 10 employees as a result of the moratorium, and will not be hiring the dozen or so workers they expected to hire in the coming months.
Cobalt International Energy, Inc
- Cobalt International Energy, Inc. (Cobalt) is an independent oil and gas exploration and production company focused on the deepwater U.S. Gulf of Mexico and the deepwater offshore Angola and Gabon.
- Cobalt was formed in 2005 and is headquarters in Houston, Texas with an operational base in Port Fourchon, L.A. for their deepwater GOM exploration activities, and an (soon to be established) operational base in Luanda Angola for their Angola exploration activities. At present Cobalt have some 65 employees and 25 consultants.
- The GOM Drilling Moratorium has significantly impacted Cobalt’s GOM deepwater 2010 exploration and appraisal program from a multitude of perspectives:
- Cobalt’s exploration and appraisal drilling program for the remainder of 2010 (3 wells of which 1 had all of the necessary permits/insurance in place) is now on hold. Thus, the exploration drilling rigs, services, vessels, tools, people etc. that were contracted to support the drilling programs have been released.
- Cobalt invoked the Force Majeure provision in a recent rig contract, thus the company is paying capital for a period of time while the rig is idle as well as the associated key services (e.g. vessels). Cobalt has also experienced unanticipated legal costs as a result.
- There is a follow-on impact in the form of delay in executing their 2011 exploration and appraisal program (approx 9 wells) in the deepwater GOM. Thus the program has been extended further/delayed into the future which will affect the timing and thus cash flow they would have anticipated sooner.
- As the deepwater GOM is a key focus area for Cobalt in light of the position established (some 227 deepwater leases) in the last few years, the company stock has been significantly impacted (dropped 40%) amid concerns regarding the GOM Drilling Moratorium; the value of the company has thus been impacted by some $1.5 billion in the market.
- Cobalt will shift its capital spending program and resources to their West Africa business. Resumption of their investment program in the United States is completely dependent on the termination of the GOM Drilling Moratorium.
- Davis-Lynch is a privately owned company founded in 1947 that manufactures, sells, and services down-hole equipment for the offshore oil and gas industry.
- They employed over 300 people in 2009, but reduced their workforce by approximately 100 people as a result of an industry downturn. In 2010 with an upswing in business they have recalled some of the people released in 2009.
- Approximately 20% of their business is dedicated to providing products and services to the offshore drilling industry in the Gulf of Mexico, with a large portion associated with water depths greater than 500 feet.
- The moratorium leaves them no alternative other than to implement another reduction in their workforce in locations including Lafayette, LA; Houston, TX; and Corpus Christi, TX.
Delmar Systems, Inc.
- Delmar Systems, Inc. is a leader in offshore mooring, providing mooring solutions for the offshore oil and gas industry.
- Delmar is a 42 year old privately held company employing 300 employees based along the gulf coast with a technical office in Houston and large operational base at Port Fourchon, LA.
- Operations are 100% directly related to mooring deepwater semi-submersibles in the Gulf of Mexico and as a result of this shutdown, will directly affect ability to operate.
- Thirteen of the thirty three deepwater wells involved “moored” or anchor semi-submersible rigs owned by four drilling contractors.
Heerema Marine Contractors
- Heerema is a 48 year old privately held Dutch company who has been working in the Gulf of Mexico for 32 years and has installed approximately 75% of all deep water facilities currently producing in the Gulf. They own and operate three of the four largest construction vessels in the world and the US Gulf has always been a significant part of the revenue stream of their company.
- They currently employ 50 people between offices in Houston, TX and an operational base at Port Fourchon, LA.
- Their U.S. operations are directly related to installation of new facilities and sub sea infrastructure in the deep water Gulf of Mexico and as a result of this shutdown, their business future is in a state of uncertainty here in the US.
Laborde Marine, LLC
- Laborde Marine is a family-owned business headquartered in New Orleans which owns and/or operate 21 vessels, all built in U.S. shipyards; while employing over 300 people with a $14 million annual payroll.
- They invested over $150 million to build or acquire thisfleet.
- The moratorium is essentially telling them to “park” their vessels for six months.
- For Laborde to move internationally, they would have to compete with vessels built in foreign ship yards at a much lower cost and often subsidized by foreign governments.
- “The moratorium may well be the death-knell for U.S. businesses engaged in the energy service sector.”
J. Ray McDermott, Inc.
- J. Ray McDermott is a Houston headquartered Company with approximately 1,200 employees in Morgan City and New Orleans, Louisiana and Houston, Texas.
- The company provides engineering and construction services to the offshore energy sector worldwide as well as in the Gulf of Mexico through the engineering, construction and offshore installation of the infrastructure necessary to develop and produce offshore oil and gas fields.
- According to the company, the shutdown of deepwater drilling in the Gulf of Mexico will create a domino effect (movement of rigs and other equipment out of the area, loss of jobs, etc.) that will no doubt affect the timing of future developments and the economic recovery of the region for years to come.
Oceaneering International, Inc.
- Oceaneering is a global oilfield provider of engineered services and products, primarily to the offshore oil and gas industry, with a focus on deepwater applications.
- Oceaneering reduced its 2010 earnings forecast on expectations that the U.S. government's moratorium on deepwater drilling activity in the Gulf of Mexico will hurt demand for its deepwater services.
- The oilfield-services and products company said it expects the moratorium will cut second-half earnings by 45 cents a share and is now looking for 2010 profit of $2.80 to $3.10 a share.
- Nearly one-quarter of Oceaneering's remotely-operated vehicles operate in the Gulf, with about half of those in drilling support services.
- The company anticipates some early terminations and revised contracts.
- The stock is down 27% this year amid concerns about the Gulf oil spill.
Otto Candies, LLC
- Otto Candies is a marine transportation company started 68 years ago with a fleet of 40 vessels.
- 500 of their 600 U.S.-based employees could be impacted by the moratorium, with some possibly needing to be relocated to Brazil, Mexico, or West Africa.
Stone Energy Corporation
- Stone Energy Corporation is an independent oil and natural gas exploration and production company headquartered in Lafayette, Louisiana, with additional offices in Houston, Texas and Morgantown, West Virginia.
- Stone has already experienced a 40% drop in the value of their company in anticipation of punitive legislation and regulation.
- They will be forced to reduce jobs as will other operators.
- Stone has a shelf platform rig at MC 109 which has been shut down, wasting over $10 million dollars by having an idle rig sitting there doing nothing.
- This cash cost will be far exceeded by the lost revenue of the five wells being drilled from the facility.
- The 5 wells were anticipated to each produce approximately 1,000 barrels per day, assuming $70 per barrel, resulting in $350,000 per day in potential lost revenues.
- Stone also has a half-dozen exploratory wells that will be delayed a year or more. This hurts their ability to sustain reserves to convert to future production and growth.
- One rig that was going to be used in this exploratory program, the Deepwater Mariannas, is expected to be leaving the Gulf for opportunities in foreign countries.
Southern States Offshore, Inc.
- Southern States Offshore, Inc. is a privately held company incorporated in 1996 and wholly owning and operating seven offshore service and supply vessels, six of which were built and delivered in Louisiana and Alabama in 1998, 2005, 2007, 2009 and 2010 at a cost of 48 million dollars.
- They employ 53 mariners who live in Texas, Louisiana and Alabama; with an office staff in Houston, Texas of ten employees, all Texas residents.
- According to the company, their employees, their families, the ship yards, vendors, tax authorities, etc. that depend on this industry to pay their mortgage, health care bills, cloth their families and send their children to school all are at risk of losing everything.
- Zupt is a privately owned, international service and manufacturing company specializing in the integration and application of inertial technologies to onshore and offshore survey and positioning services to make operations more efficient.
- Were under contract with an operator who was 8 to 12 days away from completing a well and Zupt was preparing to conduct the metrology survey work when the operator was told to shut the well. No metrology survey was conducted, an immediate loss of revenue.
- One of Zupt’s engineers was laid off due to the near term lost revenue.
- During the moratorium the company is forced to seek work in West Africa and the North Sea, and if unsuccessful they anticipated being out of business within four months.
NOIA is the only national trade association representing all segments of the offshore industry with an interest in the exploration and production of both traditional and renewable energy resources on the nation’s outer continental shelf. The NOIA membership comprises more than 250 companies engaged in business activities ranging from producing to drilling, engineering to marine and air transport, offshore construction to equipment manufacture and supply, telecommunications to finance and insurance.