Noble Energy Inc. (NBL) has received the necessary permit to resume drilling at the Santiago prospect in the deepwater Gulf of Mexico. The start of activity in the Gulf of Mexico removes a major concern for Noble Energy and other companies operating in the region, which include Anadarko Petroleum Corp. (APC) and Murphy Oil Corp. (MUR).
Drilling operations in the Gulf of Mexico were suspended in June 2010 as the federal government placed a deepwater drilling moratorium in the Gulf. The moratorium sourced from the Deepwater Horizon explosion which resulted in a massive U.S. Gulf oil spill last April.
Though the moratorium on shallow-water and deepwater Gulf drilling was lifted in May and October 2010, respectively, permits for deepwater drilling were not issued until now. Noble’s permit for the Santiago prospect is the first since the lifting of the moratorium.
Noble Energy’s Santiago is a middle Miocene amplitude prospect on Mississippi Canyon Block 519. The site is located in 6,500 feet of water. Noble Energy operates the site with a 23.25% working interest.
At the time of the moratorium, Noble Energy had drilled the Santiago exploration well to a depth of 13,585 feet. The company plans to resume activities at the well in late March 2011 with results expected by the end of May 2011. Noble said that the Ensco 8501 rig will be used to perform the drilling at Santiago. The company targets drilling the Santiago prospect to a total depth of roughly 19,000 feet.
Prior to this, the Ensco 8501 rig performed completion operations on the Santa Cruz and Isabela discoveries at the Galapagos project during the second half of 2010.
The grant of the drilling permit for Noble’s Santiago prospect is a new beginning and marks an important milestone in the oil and gas industry’s efforts to restore operations in the Gulf of Mexico ever since the massive oil-spill incident.
With the doors now open for drilling in the Gulf of Mexico we expect Noble Energy and other operators in the region to prosper from the restart of pending projects, making up for lost production over the past year.
The prospects of Houston, Texas-based Noble Energy look good mainly due to its well-balanced high-grade hydrocarbon portfolio, brilliant execution capability and competitive cost structure. Moreover, its disciplined investment approach, strong balance sheet and low debt-to-capital ratio gives it excellent financial flexibility to fund development projects.
Looking ahead, we see the stock performing in line with the broader market and rate it as Neutral. Noble Energy currently retains a Zacks #3 Rank (short term Hold).
ANADARKO PETROL (APC): Free Stock Analysis Report
MURPHY OIL (MUR): Free Stock Analysis Report
NOBLE ENERGY (NBL): Free Stock Analysis Report
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