Deep-Water Winners in the Gulf of Mexico
Which firms will benefit the most from higher levels of deep-water activity?
The Gulf of Mexico deep-water market offers an attractive combination of relatively stable regulatory and political markets, combined with substantial reservoirs. For the services firms, the market promises to be a gold mine, as using recent projects as a benchmark, we expect $30 billion to $40 billion in services spending during the next five years. Offshore drillers such as Transocean (RIG) have the opportunity to share about $15 billion to $20 billion in revenue, while subsea specialists such as FMC Technologies (FTI) and Cameron (CAM) can target about 300 trees and associated subsea systems, which is an estimated $5 billion to $6 billion market. We think Technip (TEC) is particularly attractively positioned, as it has worked on a number of projects in the region, such as Constitution, Greater Chinook, and Na Kika. The firm's deep experience in the region means it should be first in line to secure a substantial amount of work for BP's (BP) Kaskida and Tibor discoveries.
Gulf of Mexico Winners
In the short run, we think there are several key considerations to securing deep-water work in the Gulf of Mexico. The attributes are experience, financial stability, and asset availability. We think price is a secondary consideration in a region where the wells being drilled are pushing up against the very limits of today's technology. In our view, Transocean, Technip, and FMC Technologies are poised to secure a substantial portion of the development work on the early-stage discoveries in the Gulf of Mexico during the next few years.
Stephen Ellis does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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