Deepwater Moratorium in Gulf of Mexico Seen Cutting Rig-Industry Profits
Pride, Houston-based owner of 24 offshore drillships and rigs, fell as much as 9.3 percent after forecasting lower third- quarter profit than analysts estimated. National Oilwell, the biggest supplier of rig equipment, said cutbacks by customers may curb per-share profit 2 cents this quarter and next.
About 40 of the 56 rigs that were working in the Gulf before the BP disaster are idle, according to Baker Hughes Inc. Rigs will stay out of work longer than the six-month moratorium on deep-water drilling that the Obama administration imposed in the wake of BP’s spill, Pride said. It’s slated to end Nov. 30.
“The moratorium had little impact on the second quarter because of how late it occurred,” Kurt Hallead, an Austin, Texas-based analyst for RBC Capital Markets, who rates Pride shares “sector perform” and owns none, said in a telephone interview before results were announced. “In the third quarter, it basically will impact everybody.”
Per-share profit in the third quarter will be 23 cents to 28 cents, Pride said today on a conference call with investors and analysts. The company was predicted to earn 39 cents a share excluding one-time costs and gains, according to the average of 27 analysts’ estimates compiled by Bloomberg.
“Even before the incident, the sector was faced with challenges,” Pride said today in a statement announcing second- quarter income fell 54 percent to $57.5 million, or 32 cents a share, matching the average of 30 analyst estimates compiled by Bloomberg. New deep-water rigs ordered before the global recession are now glutting the market, and closing the Gulf to drilling may depress dayrates elsewhere, it said.
Pride dropped $1.23 to $23.37 at 2:34 p.m. in composite trading on the New York Stock Exchange and traded as low as $22.31. The stock has fallen 31 percent since the April 20 drilling-rig explosion that triggered BP’s record U.S. spill.
At National Oilwell Varco, the moratorium may trim profit as much as 2 cents a share for the next two quarters, Clay Williams, chief financial officer of the company, the biggest supplier of equipment for drilling rigs, said today on a conference call. Some customers have delayed purchases of drill pipe, others have suspended plans to build new deep-water rigs, he added.
Rig Income Dropping
Operating income from the nine offshore rigs of Helmerich & Payne Inc. fell 12 percent to $11.2 million in the fiscal quarter ended June 30 as usage and margins fell, the Tulsa, Oklahoma-based company said today in a statement. The moratorium accounted for 3 percent of the decline in the segment, the company said.
Helmerich & Payne reported a net loss of $36.7 million, or 34 cents a share, driven by costs of $102.7 million to write off 11 rigs seized by Venezuela in a pay dispute. Profit excluding such one-time items was a penny higher than the average of 20 analyst estimates compiled by Bloomberg.
The shares fell 7 cents, less than 1 percent, to $40.54.
National Oilwell Varco net income rose 82 percent to $401 million, or 96 cents a share, as it sold more equipment and tools to companies extracting oil and gas from hard formations such as shale in the U.S. and Canada, Chief Financial Officer Williams said.
The shares rose $1.40, or 3.8 percent, to $38.73 in New York Stock Exchange composite trading.
The spill cleanup increased sales of basic supplies and orders rose for pressure control equipment in anticipation of higher safety standards, Williams said. Sales of rig spare parts may rise in coming months as idle rigs accelerate upgrades and maintenance, he said.