Based on the discussions I'm hearing, surface may start to feel the pinch if we see less than $70, but the main players will just shift money to Subsea projects. Subsea players could actually benefit from this.

Looks like some cutbacks are coming from the big boys

Hercules set for 'mass layoffs'

Houston-based contract driller Hercules Offshore is laying off 324 people after weak market conditions forced the company to cold stack four jack-up rigs in the US Gulf of Mexico.

Hercules said in a "warn notice" filed with the Texas Workforce Commission, a labour regulator, that the layoff would commence on 31 December of this year.

"Hercules Offshore will be conducting mass layoffs of employees who work offshore in its Gulf of Mexico operations due to anticipated closure or 'cold-stacking' of four company rigs in the Gulf," the letter said.

Hercules reported in its third-quarter earnings release that it would be shutting down jack-ups Hercules 202, 204, 21 and 213 due to a softening domestic market and other challenges internationally. The move saddled Hercules with an associated $82.5 million non-cash impairment charge.

It expects the softness to persist at least until early next year. Hercules has already cold stacked six other rigs in the US Gulf, with another five ready stacked.

The company said it is trying to "better balance the market and support utilisation on our marketed rigs". Capital One Southcoast analyst Luke Lemoine said that was the right move: "The overall market remains challenging There's no point in driving down rates as lower rates won't generate incremental demand."
The layoffs, meanwhile, affect workers who disembark for travel from several ports in Louisiana and from Galveston, Texas. Affected workers were notified last week.

Hercules said it expects the layoffs to be permanent and noted that there are no "bumping rights", which allow laid off workers with more seniority to take over jobs of less senior employees.
The company did not immediately respond to a request for further comment.

From what I can tell Hercules is a shallow water driller. I don't think this news is surprising since that is not exactly a growth business. If I remember correctly they were spun out of one of the deep water drillers a few years ago.

yeah, you aren't using jack-ups for deepwater

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yeah, you aren't using jack-ups for deepwater

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Same thing is happening in DW. Look at Diamond offshore recent quarterly report. They are not laying off yet, but rig rates and contracts are down.

Where there is smoke there is often fire, but we're just not seeing a big slowdown for deep water projects. This was a record year by a large amount and more projects came in this month.

What we've been projecting is a lull for companies to regroup after all the projects that have materialized over the last three years before another large wave of projects hits next year. Lower oil prices might just be a good excuse to review personnel after all the hiring and look to become more efficient before going again. Lower oil prices shouldn't directly impact deep water in a negative way. If anything companies may shift allocation to deep water with shallow water and shale becoming less economical.

77.68 low so far

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Same thing is happening in DW. Look at Diamond offshore recent quarterly report. They are not laying off yet, but rig rates and contracts are down.

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There is a large wave of speculative new build jack-ups being built in Singapore and elsewhere in Asia. If I remember correctly, roughly 50 or more rigs will be coming to market during the next 2-3 years.... all with no buyers.

Given the success of a few groups early on, it became popular for investment banker/hedge fund types to throw capital at speculatively building rigs.... hence the coming oversupply.

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77.68 low so far

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76.97

75.92 low

Should be a another wild day. Glad I got out. Now I'm 25% in JPM (30 CMS - 2 CMS -50 bp) * 4 floating rate 2028 bonds, VV,VUG, and VTI and diversified across some other sector specific efts like the XLK XLI and XLE.

Any thoughts on RIG bonds?

Holy oil

OPEC meets the end of the month and will likely announce they are not going to cut production. Once that happens WTI will be in the $60 range.

Sounds like a price war

Smart move: Destroy Russia with a slow painful death, and keep ISIS from making any money off any oil fields they might capture.

Could this cause the real estate bubble in Houston to pop if prices dip under $70ish on the WTI?

Yes.

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Where there is smoke there is often fire, but we're just not seeing a big slowdown for deep water projects. This was a record year by a large amount and more projects came in this month.

What we've been projecting is a lull for companies to regroup after all the projects that have materialized over the last three years before another large wave of projects hits next year. Lower oil prices might just be a good excuse to review personnel after all the hiring and look to become more efficient before going again. Lower oil prices shouldn't directly impact deep water in a negative way. If anything companies may shift allocation to deep water with shallow water and shale becoming less economical.

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Have u seen the stock prices of the deep water drillers? They have been getting crushed as rates and utilization continue to decline. Tells you all you need to know about the current state of the deep water market.

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See above. Deep water is more than just the drillers who geared up for more than was forecasted especially when projects continue to executed as forecasted.

I work in E&P for a DW operator and we are cutting our 2015 budget as we speak.

Costs on offshore projects are getting out of control as well.

Lower prices + costs are going to cause some folks to reevaluate. Look at what Statoil is doing in Norway.

Thanks CivilAg

Use this one, less lag time than the Bloomberg chart
Current Oil Price (10 min lag)

Could war or a bad Gulf storm still affect prices like they used to?

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Could war or a bad Gulf storm still affect prices like they used to?

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If it effects the future supply of oil, certainly of course. Libya is just finally now coming back on-line fairly strongly so any destabilizing there would probably have a modest upward force on pricing.

Have we had a hurricane since the fracing boom? I don't recall one. I wonder if it would spike as high with all the new supplies in the pipeline.

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Could this cause the real estate bubble in Houston to pop if prices dip under $70ish on the WTI?

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Absolutely. Commercial is already overheated. Pricing above replacement cost. Few barriers to entry. Tons of foreign institutional capital chasing Houston product. It oil drops another 5-10 it will be very interesting to see the impact on commercial and residential.

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Have we had a hurricane since the fracing boom? I don't recall one. I wonder if it would spike as high with all the new supplies in the pipeline.

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One could argue Ike (2008), but for the most part, no.

The other issue is that a lot of the new oil from fracking is Bakken. Little difficult to get a hurricane up there. You could have a hurricane hit EF shale, but I doubt it would still be a hurricane, barring a massive Cat 5 running fast.

~egon

Too cold for hurricanes and el nino is keeping them in the atlantic.

http://www.wallstreetdaily.com/2014/11/04/energy-sector-debt-levels/

EOG ain't afraid of low oil prices

Source?

EOG releases awesome earnings after the close today and planning to increase activity in the Permian.