Gulf oil spill financial damage seen spreading

* Six-month drilling halt would affect 80,000 bpd

By Anna Driver

HOUSTON, May 14 (BestGrowthStock) – Shares of companies like BP Plc
(BP.L: ) (BP.N: ) involved in the well-blowout in the U.S. Gulf of
Mexico have taken a big hit in recent days, but now other firms
that make a living in those waters are starting to feel
financial pain from the massive oil spill.

The U.S. Department of the Interior issued a moratorium on
new drilling permits at least until May 28 when a safety review
is due to be completed and now analysts and investors are
beginning to fret about future implications of the ban.

A six-month halt in new drilling would defer as much as
80,000 barrels of oil equivalent per day, or 4 percent of
projected production in the Gulf of Mexico in 2011, according
to energy consultancy Wood Mackenzie.

“Longer term, after the moratorium is eventually lifted the
cost implications of this accident on future drilling could
prove significantly detrimental for the industry,” research
firm Raymond James said in a note to clients on Friday.

In the near term, the permit ban will crimp drilling
activity.

The halt in drilling permits came after the April 20
Transocean Ltd’s (RIG.N: ) (RIGN.S: ) Deepwater Horizon rig
explosion killed 11 workers and triggered what could become the
worst environmental disaster in U.S. history.

Rig contractor Hercules Offshore Inc (HERO.O: ) said three of
its rigs are expected to finish jobs during the permit ban, so
the company “does not expect any of these drilling rigs to
secure additional contracts until the moratorium is lifted,”
the company said in a regulatory filing on Thursday.

If the moratorium is extended beyond the end of May, “it
could also affect our other jack-up drilling rigs in the U.S.
Gulf of Mexico regardless of contract status,” Hercules said in
its filing with the U.S. Securities and Exchange Commission.

An extended permit moratorium would “create hurricane-type
earnings impact where rigs and service companies have costs and
people in place but potentially no revenue,” Houston-based
energy firm Tudor Pickering Holt & Co said in a note to
clients.

Drillers with big business in the U.S. Gulf include Diamond
Offshore Drilling Inc (DO.N: ), Noble Corp (NE.N: ) and ENSCO PLC
(ESV.N: ).

And profit at oilfield service companies Halliburton Co
(HAL.N: ) and Baker Hughes (BHI.N: ) “would be most negatively
impacted by an extended work stoppage,” research firm Bernstein
said in a note to clients on Friday.

The chief executive office of U.S. oil company
ConocoPhillips (COP.N: ), Jim Mulva, told reporters on Wednesday
the spill will likely hinder development of the giant Tiber
discovery in the Gulf. [ID:nN12202633].

BP Plc is the operator of Tiber, Brazil’s Petrobras
(PETR4.SA: ) owns 20 percent and Conoco has an 18 percent
interest.

And if the drilling permit ban last months, drilling
contractors working in the Gulf could assert force majeure and
move their rigs to work in other waters, analysts said.

Also, hopes for the relaxation of licensing restrictions in
some U.S. offshore waters now appears unlikely.

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(Reporting by Anna Driver, editing by Leslie Gevirtz)

Gulf oil spill financial damage seen spreading