I can think of a lot of reasons why the successful test run of the Jack oil field yesterday by partners Chevron Corp. (NYSE:CVX), Devon Energy (NYSE:DVN), and Statoil ASA (NYSE:STO) is significant.
For one, this cuts the potential for me to have to move into a smaller apartment in order to continue to fill up my gas tank. For the rest of the economy, this will likewise also be a positive, as it could help ease the $70-a-barrel-plus oil prices that we've been dealing with recently. Though the size of this Gulf of Mexico site pales in comparison to some of the large fields in the Middle East, there's the potential for these new finds to be a larger source of oil for the U.S. than Prudhoe Bay in Alaska.
For investors in Chevron, Devon, and Statoil, yesterday was definitely a happy day. Devon in particular had a fine day when it saw shares soar over 12%. And if everything continues to move forward with this site, the three partners could see more bright times ahead. Things could likewise be positive for other companies such as Anadarko Petroleum (NYSE:APC) and ExxonMobil (NYSE:XOM), who also have federal leases to explore this region of the Gulf.
Particularly notable about the discovery, though, was the depth at which they were drilling. One source put the combined total of water depth and drilling depth at 28,175 feet, which makes Jack one of the deepest production oil wells worldwide, and the deepest to date in the Gulf area. Compared to drilling on land or in shallower water, drilling at depths of multiple miles presents significant challenges to drillers.
One such challenge is the pressure buildup that can occur when drilling in extremely deep water. If this buildup is not monitored and controlled, it can cause a blowout, which is an uncontrolled release of gas and fluids known more technically as a "KABLOW!" Blowouts are a big concern for drillers, as they can lead to loss of oil and equipment, environmental damage, and even death.
Companies specializing in the oil rig technology that allows for drilling deep ocean sites are a potential beneficiary of the find in the Gulf. With this encouraging event, it's likely more oil companies will look toward drilling in the deep waters of the Gulf for new oil -- and spend a good deal of money on premium drilling equipment in the process.
The oil rig equipment and technology industry is very competitive and includes diversified suppliers of both surface- and ocean-drilling equipment, such as Canrig (a subsidiary of driller Nabors Industries (NYSE:NBR)), National Oilwell Varco, Cameron International, and Weatherford International. While they will undoubtedly pick up a chunk of the increased business, I see even more potential here for a company like Hydril (NASDAQ:HYDL), which is solely focused on providing equipment for high-stress environments like deep ocean drilling. Of course, as exciting as the new discovery is, interest in putting up the money to explore more deep ocean sites is still going to depend on oil prices staying high, which could lead to me considering giving up my car altogether.
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Foolish contributor Matt Koppenheffer does not own any of the stocks mentioned in this article, but he'd be quick to remind readers that the Fool has a disclosure policy even a premium deep-sea drill couldn't break.
