In the aftermath of the 2010 BP (NYSE:BP) Deepwater Horizon disaster and the subsequent moratorium on Gulf of Mexico drilling, deepwater drilling activity in the region plunged. But over the past year or so, Gulf drilling activity has come roaring back, with the number of drilling permits issued in the region surging to a record 807 in September of last year.
With a handful of major oil companies set to start up new projects in the Gulf this year, production is set to surge by 15% to about 1.5 million barrels of oil a day, according to energy consultancy Wood Mackenzie. Let's take a closer look at three major projects set to start up this year and their impact on the companies involved.
Chevron's Jack/St. Malo
First up is Chevron's (NYSE:CVX) Jack/St. Malo project, which involves the development of the Jack and St. Malo fields using a host floating production unit located between the two fields in water depths of 7,000 feet. The project is slated to come online this year, with a maximum capacity of 177,000 barrels of oil-equivalent per day, or BOE/d, of which 88,500 BOE/d will be net to Chevron.
Chevron maintains a 51% working interest in the St. Malo field, along with partner Petrobras (NYSE:PBR), which has a 25% stake, Statoil, which holds a 21.5% interest, and ExxonMobil and Eni, which each hold a 1.25% interest. It also maintains a 50% interest in the Jack field, along with partners Maersrk and Statoil, which each hold a 25% stake in the field.
Chevron is planning a huge ramp-up in its Gulf of Mexico production over the next few years. In addition to Jack/St. Malo, the company is also getting ready to bring online two other major Gulf projects this year -- Big Foot and Tubular Bells. Combined, these projects will contribute more than 150,000 BOE/d of net production when operating at full capacity, more than doubling Chevron's 2012 deepwater Gulf of Mexico production level of 125,000 BOE/d.
Hess' Tubular Bells
Next up is Hess' (NYSE:HES) Tubular Bells project, which involves the development of the Tubular Bells deepwater oil and gas field using a subsea wet tree infrastructure tied back to a three-level topside structure and supported by a design spar. The $3 billion project -- operated by Hess with a 57.14% working interest, and Chevron, which holds the remaining 42.86% interest -- is slated to come online in the third quarter of this year.
It will have a peak production capacity of 40,000-45,000 BOE/d, with production net to Hess expected to be 25,000 BOE/d this year. Citing recent encouraging drilling results, Hess reckons that there could be additional upside from Tubular Bells in terms of production and reserves. In addition to its assets in North Dakota's Bakken shale and Norway's Valhall field, Tubular Bells will be one of the main contributors to the company's near-term production growth.
A third major project coming online this year is Anadarko's (NYSE:APC) Lucius project, which involves the development of the Lucius oil field. In its fourth-quarter earnings release, Anadarko said it has completed the installation of the 80,000-barrels-of-oil-per-day Lucius truss spar -- a massive 23,000-ton floating production facility -- that will be used to extract oil from the field.
Production from Lucius is expected to commence on time and on budget in the second quarter of this year. Other owners of the project include Plains Exploration & Production, which has a 23.3% stake; ExxonMobil, with a 15% stake; Apache, with an 11.7% interest; Petrobras, with 9.6%; and Eni, with 5.4%.
The project's start-up will help cement Anadarko's exceptional footprint in the Gulf. In addition to its Caesar/Tonga project, which achieved first oil in 2012, and Lucius, Anadarko expects to begin producing oil from the Heidelberg field, which is also being developed using an 80,000 BOE/d truss spar, in 2016. Along with its North American onshore assets in Texas and Colorado and megaprojects including El Merk in Algeria's Sahara Desert and the Jubilee oilfield offshore Ghana, these projects should drive 5%-7% annual production growth for Anadarko through 2020.
The bottom line
As you can see, 2014 will be an exciting year for Gulf of Mexico energy producers. In my view, Chevron is arguably the best-positioned oil major in the region, though Royal Dutch Shell and BP aren't far behind, while Anadarko is a clear standout among the midmajors given its robust portfolio of projects and its peer-leading exploration success. Investors should keep an eye out for any potential delays in these projects' start-up dates, since they could have a material impact on companies' earnings and cash flows.