Beaten down by depressed gas prices, a collapsed credit market and continued facilities damage from Ike, operators executed only minimal exploration and development programs in 2009. Compared with 2008, there was a 46% reduction in the number of wells permitted. Exploratory wells drilled dropped from 51 in November 2008 to 27 in November 2009, a 47% decrease. Development drilling dropped from 53 wells to just 25, a 53% decrease, during the same period. Jackup utilization at the beginning of November totaled 32%, and the rig count is 42% below what it was for the same period in 2008. Recent contracts and an increase in bid requests suggest that there will be an upturn in Gulf of Mexico drilling during 2010. These early indicators may lend support to the belief that the cost of drilling services has bottomed out on the shelf. The increased activity is also being reflected in dayrates, which are reported to have increased by about 15%.

Excerpted from World Oil Magazine Dec. 2009