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Gulf of Mexico Seeing Drilling Improvement

Gulf of Mexico Seeing Drilling Improvement

Fourteen consecutive months of declining drilling rig utilization came to an end in July, according to Global Marine's most recent SCORE report, or Summary of Current Offshore Rig Economics. And the Gulf of Mexico appears to be leading the turnaround.

Global Marine said its worldwide SCORE for July 1999 rose 1.5% from the previous month. Rig utilization rose 7.9% in the Gulf in July compared to June. Improvement was seen for both jack-up and semisubmersible rigs, increasing 0.3% and 2.6%, respectively.

"Although international rig markets continue to be weak, improving conditions in the U.S. Gulf of Mexico are encouraging," said Global Marine CEO Bob Rose. "Higher oil and gas prices appear to be providing the impetus for increasing drilling activity in the Gulf of Mexico, primarily by many of the independent oil and gas companies. Because of the size and scope of upstream projects in markets such as the North Sea and West Africa, long lead times and planning horizons tend to cause those regions to respond more slowly to changing economic conditions. So, while the rates of decline in the international rig markets have slowed, we have not yet seen the turnaround observed in the Gulf of Mexico."

Global spokesman Michael Dawson said the company counts 184 competitive rigs in the Gulf with 115 of them currently working, making for a 62.5% utilization rate. He said Global is at 100% utilization right now. "We expect to see the Gulf continue to strengthen. We are bringing in two rigs from West Africa."

The Baker Hughes rotary rig count for Friday, Aug.20, shows an increase of three in the number of rigs operating in the Gulf to 104 last week. That's still down four rigs from the 108 operating a year ago. Baker reported the North American rotary rig count was up last week by 3 rigs to 907 from 904 the previous week. But at 907, the North American count is still down 87 rigs from the same period a year ago when 994 rigs were active in North America.

Global Marine's SCORE compares the profitability of current mobile offshore drilling rig rates to the profitability of rates at the 1980-81 peak of the offshore drilling cycle, when speculative new rig construction was common. In the 1980-1981 period, when Global Marine's SCORE averaged 100%, new-contract day rates equaled the sum of daily cash operating costs plus about $700 per day per million dollars invested. A separate SCORE is calculated for various types of rigs and regions to indicate the relative condition of rig markets. Regions included in the release are the U.S. Gulf of Mexico, the North Sea, West Africa, and Southeast Asia. Rig types include jack-up and semisubmersible rigs.

The worldwide SCORE for all types of offshore drilling rigs rose 1.5% to 23.6% from 23.2% in June. The July 1999 SCORE is a 66.9% decrease from July 1998 and a 31.4% decrease from the same period five years ago. The SCORE for the U.S. Gulf of Mexico increased 7.9% to 20.7% from June's 19.2%. The July 1999 SCORE is a 63.7% decrease from July 1998 and a 41.1% decrease from five years ago.

Houston-based Global Marine is one of the largest offshore drilling contractors with an active fleet of 31 mobile rigs worldwide plus two new drillships under construction. In addition, the company is the world's largest provider of offshore drilling management services, employing approximately 10 additional rigs.

Joe Fisher, Houston

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