If you are new to this industry, you’ll need to spend time learning terminology to help you feel more acquainted with the information that pertains to offshore drilling. However, the basic concept behind this industry involves hiring a crew to bring a giant drill into the middle of the ocean to search for petroleum. Of course, there are exact procedures and scientific calculations that make this industry worthy of your attention. The majority of this article will deal with the types of trends that we can expect to see change the shape of the offshore drilling industry; many of these trends deal with government regulations and the availability of oil reserves in various regions of the world.
This article will interest anyone that enjoys staying in touch with current events. However, this will be of special interest to people who are working with offshore drilling companies over the course of the next year. Investors need to make careful decisions about which stocks or options to purchase, so they should pay close attention to such trends, and anyone who is interested in getting involved in running an offshore drilling company should take note of these predictions.
Trends for the Offshore Drilling Industry in 2020
If you want to invest in offshore drilling companies, you need to know where to put your money. The following list of trends has been generated through researching industry predictions about offshore drilling in 2020. Pay close attention to the trends that impact stock prices to make the most on your portfolio in 2020.
Expectations for Jackups
One of the most popular methods for offshore drilling involves using a mobile rig called a jackup. These types of rigs have long legs that extend above the ship’s deck until the unit is in proper position to begin drilling. The legs move to the floor of the ocean when drilling begins.
The expectation for jackups being used in the offshore drilling industry in 2020 is neutral. Although, Rigzone claims that the demand will plateau in Europe and farther east. In the North Sea, the demand for jackup rigs will climb slightly, but it will drop in other areas of the world. Rigzone claims that the demand for these types of rigs will remain stagnant for North America and South America in 2020 and 2021.
More South American Floaters
Research indicates that there will be more activity in South America in the next year. Rigzone believes that Exxon Mobile will add a few more floaters to their fleets. There’s also a trend of new offshore drilling activity surrounding the country of Brazil. Rigzone suggests some additions to its fleet of drill ships, and the companies operating around Brazil are expected to add more semi-submersible platforms to their operations. These changes will depend upon how regulations mature within Brazil’s governing channels.
More Drilling in West Africa
The offshore drilling industry is becoming more popular off the coasts of West Africa. Rigzone reports that offshore drilling ships will become more plentiful. However, there will be hardly any change in the number of semi-submersible platforms that operate in the area. Rigzone also reports that Nigeria and Angola will experience the beginning of “long-term developments” in offshore drilling.
Drilling in North America and Central America
There have been some exploratory measures in the recent past that will cause the trend of floaters in the water around the Gulf of Mexico to increase in 2020. Trinidad should see a slight increase in drilling in the next few years. Rigzone claims that the drilling procedures surrounding these areas will depend upon “the success of new exploration campaigns.”
Oil Prices Rise Higher Than $60 for a Barrel
The price of $60 per barrel of oil is a result of the trade agreement between the United States and China. According to MSN Money, this agreement should continue to impact oil prices in the next year. Despite trade agreements, the price will continue to rise because one of the major groups (OPEC) is expected to cut its production by 500,000 barrels in January of 2020.
Offshore Reserves Running Low
One of the trends that this industry will see in the next few years is a diminished supply of oil from offshore reserves. MSN Money has written about the idea of offshore drilling becoming more popular because of the depleted reserves surrounding land drilling sites. Since there isn’t as much of the resource available on land, more companies have moved to financing offshore drilling operations. There are less government regulations to stop companies from drilling in the ocean. Consequently, the reserve of natural resources within the ocean floor is going to be diminished by a rise in popularity of offshore drilling.
Industry Will See Cut in Cost of Operation
Offshore drilling operators are expected to cut costs to maintain their current operations in the next year. MSN Money reports that operators are expected to increase their efficiency levels as well. The low cost of operating efficient rigs will reflect upon profits shared between all parties.
Day Rates Will Improve
The trend of improving day rates for offshore drilling is expected to continue in 2020. The increase to day rates is due to the growth in offshore spending in Brazil and similar markets.
Impact From Drone Strikes
Drone strikes are a real threat to drilling being completed on land. In areas that have experienced drone strikes, drilling has become a greater risk to everyone involved in the operations. Saudi Arabia was attacked by drone strikes in September, so these attacks have made many people reconsider the efficacy behind offshore drilling in the upcoming years.
No Repricing of Current Assets
The price of current assets involved in offshore drilling is expected to remain the same until 2021. According to Seeking Alpha, there won’t be any major repricing in the upcoming year. This does not mean that there won’t be major negotiations being conducted in the industry. However, the industry prognosis indicates that there are going to be few changes to the number of actual rigs in commission, so activities will be centered around those with the money to make decisions about where to drill. Seeking Alpha speculates that the financiers are having their own challenges putting money together. There is also an issue with many of the drillers handling their current levels of debt.
Must Know Statistics
Knowing statistics about offshore drilling is interesting because you get to see how each stat reflects upon stock prices. The industry experiences plenty of radical change to make recalling these facts interesting to many of the people in your social circles. Many of these statistics are worth sharing with your colleagues, but some of them might be worth keeping to yourself to see how your investments pan out in the next year.
- The price for oil dropped to a new low in 2016 at $26 for a barrel. This dramatic drop in the cost of oil can be attributed to the energy companies exploring new methods for finding resources.
- Rigzone reports that one of the main influencers of the success in recent offshore drilling practices is the ability of operators to cut their costs by 30 to 40 percent.
- According to Seeking Alpha, jackups that were built in 1980 will be out of commission this year because of the high costs of upgrading the rigs.
- According to Bionmicfuel, the United States uses 21 million barrels of oil per day, but offshore drilling in the United States only accounts for 1.5 million barrels of oil produced each day.
- In January of 2020, one of the major oil drilling companies, OPEC, announced that it will be reducing its production of offshore drilling. They will be reducing their production by approximately 500,000 barrels per day. The company will continue the reduction for three months. According to MSN Money, OPEC and other companies have already reduced their production by 1.2 million barrels per day.