NEW YORK – Evercore ISI’s most recent US Drilling Permit Monthly update shows that new well filings have returned the Gulf of Mexico’s permit numbers to an upward trajectory, with deepwater in particular filing a strong increase.
Overall, December’s permit numbers showed a gain again after falling in November.
Evercore ISI’s Oilfield Services, Equipment & Drilling group reviews and compiles drilling permit data numbers from a number of sources, including state boards and the Bureau of Safety and Environmental Enforcement, for the report. Given the costs, time, and effort invested before drilling or re-entry even begins, the group finds the permit numbers to be a leading indicator for near-time drilling activity.
December’s total of 11 new permits grew 57% from seven in November, which had broken a string of three sequential monthly gains. December’s total was down just 27% from permitting year-over-year, Evercore ISI found.
Shallow-water permitting held at two permits in December, with one new well and one side track approved.
One ultra-deepwater well was filed in December, up from zero ultra-deepwater permits filed in the previous two months.
Midwater permitting showed “a modicum of resilience,” the report noted, falling just two permits month-over-month to a total of three for the month of December.
Deepwater permits experienced the largest sequential growth, expanding from zero permits in November to five in December.
New well permits grew from one in November to six in December, while side track permits fell 50% to two and bypass permits increased 33% to three.
Despite this good news, the analyst continues to see the area of shallow-water permitting as an area of concern and continues its feelings of what it has previously called “cautious optimism” regarding the offshore market overall.
“The sharpest decline year-over-year has come from shallow-water permitting, down 73% in 2016 from full-year 2015. We believe that offshore drilling will continue to languish as long as shallow-water permits remain at historically low levels,” the report said.
“Offshore planning from last month suggests more GoM weakness moving forward, with just three mid-water plans filed in the month of December. Overall, we remain cautious in allocating optimism to the offshore space, but permitting trends have certainly shown upward momentum over the past quarter.”