The announcement by Chevron Corporation (NYSE:CVX) that it will invest $7.5 billion to develop two of the Gulf of Mexico's largest unexploited oil fields is the first big commitment from an oil major since the drilling moratorium was lifted. The newly sanctioned projects—Jack and St. Malo—represent two of the biggest finds of the last decade in the U.S. Gulf, potentially holding 500 million barrels of recoverable oil and gas. Production is expected to begin in 2014, in 7,000 feet of water roughly 280 miles south of New Orleans.
Brokerage Natixis Bleichroeder recently upgraded the largest of the deep water drillers Transocean (NYSE: RIG) to Buy.The Natixis analyst commented that, “In our previous update for Transocean, we had assumed lower dayrates for deepwater rigs drilling in the U.S. Gulf of Mexico based on uncertainties surrounding the Macondo incident. With the end of the deepwater moratorium, renegotiations on most contract disputes, and lack of successful force majeure proceedings, we believe that most contracts will be honored at their original contracted dayrates. Assuming BP honors its contractual indemnity with RIG, and based on Transocean’s history as a premiere offshore driller, we believe that RIG is likely “out of the woods.”
“Longer term this could also be good news for AIM quoted Pressure Technologies (LON:PRES) the manufacturer of ultra large cylinders which are used on the offshore rigs as motion compensation systems. As we stated in our earlier commentary (IC 19th October 2010) anticipated orders for deep water projects at the Group’s subsidiary, Chesterfield Special Cylinders which manufacturers ultra large cylinders (c60% of group turnover) are still pending, and receipt of firm orders by December 2010 will be key to the Group meeting market expectations for the year ending 30th September 2011.
