May 14, 2010 / 6:59 PM / 10 years ago

Gulf oil spill financial damage seen spreading

HOUSTON (Reuters) - Shares of companies like BP Plc 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 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 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, Noble Corp and ENSCO PLC.

And profit at oilfield service companies Halliburton Co and Baker Hughes “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, Jim Mulva, told reporters on Wednesday the spill will likely hinder development of the giant Tiber discovery in the Gulf.

BP Plc is the operator of Tiber, Brazil’s Petrobras 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.

Reporting by Anna Driver, editing by Leslie Gevirtz

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