CGGVeritas, the world’s largest seismic surveyor for oil and gas, TGS-Nopec Geophysical Co. and Petroleum Geo-Services ASA soared after the U.S. lifted a ban on deepwater oil and gas drilling ahead of schedule.
CGG rose 8 percent to 17.89 euros in Paris. TGS soared 10.3 percent to 98 kroner and PGS rose 7 percent to 74.3 kroner as of 5:30 p.m. in Oslo.
“It’s a relief rally, things are going back to normal,” Lukas Daul, an analyst at SEB Enskilda ASA who rates PGS and TGS a “buy,’ said by phone. “We’ll probably get going faster on seismic than on drilling, where you need to meet a series of requirements and you’re dependent on getting drilling permits -- that will be the new bottleneck.”
U.S. President Barack Obama halted drilling in waters deeper than 500 feet (152 meters) after BP Plc’s Macondo well off Louisiana blew out April 20, killing 11 workers and causing the biggest U.S. oil spill. Yesterday, Interior Secretary Ken Salazar ended the ban, which was scheduled to expire Nov. 30, while saying companies must meet new safety requirements.
“It’s now appropriate to lift the suspension on deep-water drilling for those operators that are able to clear the higher bar that we have set,” Salazar said on a conference call.
The seismic market has struggled as oil producers slashed spending last year because of the global recession, an oversupply of vessels and the Gulf moratorium. CGG reported a 17 percent drop in second-quarter revenue, while TGS had a 10 percent decline in sales and lowered its guidance range for the year to $550 million to $600 million.
CGG’s Chief Executive Officer Jean-Georges Malcor said in a Sept. 3 interview that he didn’t anticipate a price recovery until mid-2011 due to the vessel oversupply.
“We probably won’t see an immediate price jump,” Daul said. “The importance of the Gulf will diminish in 2011 compared with 2009, when you had a lot of big surveys. But once things get back to normal in the Gulf, which is the biggest multiclient market globally, it will have significance for the seismic companies’ late sales.”
Drilling contractors active in the Gulf also rose after the U.S. decision.
Seadrill Ltd., operator of the second-largest fleet of ultra-deepwater rigs, rose as much as 3.3 percent to 176.4 kroner, and traded at 176.2 kroner as of 11 a.m. in Oslo.
Stricter regulation “for offshore will come for sure, which will be fantastic for Seadrill,” the company’s billionaire founder John Fredriksen told reporters on Sept. 1, adding that rig rates “will surprise on the upside.”
New rules on drilling in the Gulf will add $183 million a year to the cost of drilling on the Outer Continental Shelf, the Interior Department said in a notice to be published tomorrow in the Federal Register. That will mean an extra $1.42 million in costs for each new deepwater well that uses a floating rig. Shallow-water wells will cost an extra $90,000.
“The impact from the slight cost increases on the offshore drilling market should be limited and the fact that the moratorium was lifted earlier than planned bodes well for all offshore drilling companies,” Patrick Rafaisz, an analyst at Bank Vontobel AG, said in a note today. “The general sentiment towards offshore drilling companies is likely to improve.”