XOM just added a 6th & 7th Guyana project

Trying to read the tea leaves here and connect some dots... Guyana wants to speed up the "P" portion of E&P in their waters. Guyana asked XOM to give back some offshore blocks because they thought XOM had too many blocks moving too slow. XOM wants to keep as many wells as possible in order to prevent some of those give backs and keep that number as low as possible. So, XOM is going to be drilling more holes faster into the seafloor.

As far as I can tell, it takes around 60 days to drill a deepwater well if all goes right. That's almost 12 years of work for one drillship. That's too long for Guyana to wait. Guyana has estimated they will 6-7 more drillships. I'm thinking XOM will need more drillships to keep more blocks. That will increase the number of drillships needed in an already tight market... meaning dayrates are going up and paid reactivations will begin sooner rather than later.

And now this...

ExxonMobil’s Whiptail project sets sights on 72 wells to propel oil output surge

By OilNOW - August 21, 2023
oilnow.gy/featured/up-to-72-wells-targeted-for-exxons-massive-sixth-stabroek-block-development-as-eia-submitted-for-review-approval/


ExxonMobil’s Whiptail project is slated to target up to 72 wells to develop the fields.

This was outlined in the Whiptail Environmental Impact Assessment (EIA) submitted to Guyana’s Environmental Protection Agency (EPA) for review and approval, on August 20.

“…EEPGL has identified the presence of multiple reservoirs of crude oil with an estimated recoverable resource of approximately 1.75 billion cubic meters (m3) of oil-equivalent resources in the eastern half of the Stabroek Block,” the EIA outlined.

With it completed, there is now a 60-day period for perusal of the 3,600+ page document by the public where they can make written submissions, citing any concerns they may have.

The Whiptail development will be located 195 kilometers northeast of Guyana’s capital Georgetown. Along with the 72 wells being drilled (including production, water, and gas injection wells), the project also entails installing and operating subsea umbilicals, risers and flowlines, a floating production vessel, and decommissioning.

Onshore logistical support facilities and marine/aviation services will be used to support each development stage.

As with previous developments, Whiptail will also employ the use of onshore infrastructure – shore bases, warehouses, storage and pipe yards, fabrication facilities, fuel supply facilities and waste management facilities.

Whiptail is expected to employ up to a peak of 540 people during the drilling and installation stage and from 100 to 180 people during the production operations stage.

Production levels at Whiptail are expected to be 250,000 barrels of oil per day (bpd). The FPSO will be used to produce the crude, with two million barrels of oil storage capacity. The project will offload crude to a tanker, every three to six days during peak production.

Exxon has signed a memorandum of understanding with SBM Offshore, for the construction of a multi-purpose floater hull. First oil is expected between the fourth quarter of 2027 and the second quarter of 2028, for at least 20 years.

The project’s gas production capacity will be between 400 million and 640 million standard cubic feet per day (mscfd). ExxonMobil does not plan to export the gas. It has proposed using some for fuel for the project, then reinjecting the rest to maintain reservoir pressure and improve oil recovery.

Whiptail is the last project on Exxon’s list of six to come online by 2027 in the Stabroek Block. While the goal for this milestone was 1.2 million bpd, Whiptail will take production capacity to more than 1.3 million bpd.

Something does not add up. 1.75 billion m3 = 1.75 E9 * 1000 = 1.75E12 l -> 1.75E12 l /119 l/barrel = 14 billion barrels.

14 billion barrels / 13 billion dollars is 1 dollar/barrel.

At $80/barrel, they would be making a *$%&load of money.

Those ultra-low production costs in Guyana are the result of Exxon getting
the Stabroek block before Guyana wised up and ended it's ultra-low profit-sharing
and royalty scheme in favor of one more in line with other countries.

That's why Exxon et-al are pedal to the metal to develop as much as possible
before time runs out and any portion of the block reverts back to Guyana to
re-auction at the much higher lease rates. Frankly, I'm surprised they've
committed as much to the Permian shale as they have instead of putting everything
they've got into Stabroek. Their Permian holdings aren't going anywhere while
they put money into Stabroek.

Are you implying the costs are indeed around 1$/barrel, but it gets up to $25-$30 barrel because of royalties?

No.

Along with what Spok said, in my tiny brain, it implies that XOM knows they are sitting on a black gold mine. Guyana has also wised up. Guyana knows that they have a black gold mine too. Everyone knows the ESG woke folks are trying to mandate an end to black gold. Self-interest was guiding XOM… not Guyana’s interests. To exploit the black gold before it will be mandated out of existence, Guyana got impatient and more educated on what they had and how to run the show to their advantage and not XOM’s advantage. So, Guyana essentially told XOM they had to return some blocks that were going under-explored, under utilized, and therefore non-productive and not monetized.

After the come to Jesus meeting between XOM and Guyana, XOM is told they must give back acreage not being used. So, if you are XOM what do you do? You can’t piss off Guyana and kill the goose that lays your black gold eggs, so you drill holes. The good holes you keep the dry holes you give give back. That’s not going to be 100% accurate, but it’s at least a more educated guess to determine what to keep and what to return.

As for drillships, their cost compared to profits is like barrel of fresh water dumped in the ocean. It does not change the salinity one bit or raise sea water levels.

Now, throw in Covid lockdowns destroying oil demand, low oil prices, demonization of reliable fuels by ESG fairy tales related to green unreliable energy, and false assumptions predicting grids powered by unreliable green power sources, big oil underspent on new wells and support infrastructure. Big oil was reluctant to spend on E&P for a demonized power source and under-invested. So, because offshore projects have very long lead times. Big oil decided to wait and see.

During the wait and see period, drillship fixture barely cover fixed cost breakeven rates. The company letting a tender was getting dirt cheap rates. Drillship companies were going bk. Big oil dictated terms.

Now the tables have turned, but it takes time to establish a new base for dayrate expectations. That is an ongoing process. India’s ONGC is an example of expectations that derailed but are finding a new base. They failed to budget for rising drillship dayrates. That forced them to tender for one drillship instead of two. 

That said, I know big oil can count. They can count world totals of floaters. They can count how many profitable holes they need to drill. They can count barrels of oil needed to power grids, power ICE vehicles, and supply chemicals for products made from oil. 

It just takes time to reset baseline expectations and rework budgets. 

Don’t forget after the last reset, RIG had drillships with $600K dayrate handles. The end of those contracts was this year and last year. 

Those days are coming again.

YAY! 

One footnote I would add to this, is that developing countries all over
the world that have proven or prospective oil reserves are nervous about
all the (mostly woke) talk about "peak oil". It makes them worry that
their oil could become stranded over the next few decades and hastens
their actions toward getting it developed and flowing sooner.

There are multiple things I like about Transocean right now but, strangely,
one of the main ones is the positive influence that I think the energy
transition toward renewable energy is having.

The energy transition is having the dual benefit of creating urgency to
develop oil resources, as I mention above, and it is also causing deepwater
drillers to scrutinize the economics of newbuild rigs more than before
since a brand new drillship with a lifespan of as much as 50 years may not
have a good payback if the energy transition begins to lessen demand for oil markedly
10 to 15 years from now.

Personally, as a disciple of Transocean's slide #4 from last January's slide
presentation (among other illustrations), I'm less concerned about oil demand
20 years from now than most people are. But there's no denying that there's far
more uncertainty in the industry than there was in previous drilling up-cycles
and uncertainty always impacts major investment decisions.

I would add that with 12, cold-stacked drillships still out there and 4 stranded
drillships still owned by the shipyards they sit in, nobody's going to consider paying
over $1 billion for a pure-newbuild drillship until all those idle assets are working
and deepwater drilling CEOs get a feel for where the cycle is and the demand is 
for rigs at that time.  That "time" is still many years off, IMO (and the opinion of
Noble's CEO) so there's little question in my mind that we won't see any newbuild
drillships this decade.  Given the current sold-out situation with H.E. semis, it is
possible that one or 2 could get build before 2030, however.

If we connect the lack of new drill ships and semis with the urgency to drill + a steady
stream of new deep water discoveries, something has to give. I don't have the overview
to put supply and demand together, but my gut feeling says that at some point, something
has to give. 

The overview to evaluate the supply and demand of floating drilling rigs is just to understand these elements: 1) dayrates.. they are rising as more and more oil/gas companies vie for fewer and fewer available rigs. 2) Active rig utilization.. this is how you gauge near-term supply as H.E. semis are now sold out through next April and drillship utilization is above 95%. 3) Stacked and stranded rig inventory.. floaters in this state are rapidly declining with just 12 cold-stacked and 4 stranded drillships remaining. Transocean owns 8 of the 12 cold-stacked drillships. 4) Oil company budgets for Deepwater E&P.. Steadily rising since mid-2021 and the proportion of Deepwater spending vs shallow water or onshore continues to increase. 5) FPSO orders and construction.. FPSOs are needed to Produce, Store and Offload Deepwater oil. The more FPSOs ordered, the more Deepwater oilwells must be drilled to provide oil and gas to them.

People are risk averse. The masses would rather wait to buy a stock until most of the risk is gone. By the time most of the risk is gone the stock's price has already made its biggest and quickest percentage gains. As risk diminishes, more and more people jump on the bandwagon. That is happening with RIG, just not at the pace we would like. 'We', on this forum, know the supply and demand dynamic is working in RIG's favor. Most investors don't 'drill down' far enough to know the numbers you've posted. They are just waiting for more fixtures with longer contracted time periods, with higher dayrates, and customer-paid reactivations. That makes RIG more predictable. It's easy to do the math for an XOM 5-year, $500K dayrate, with a customer-paid reactivation. When Shell, Chevron, TotalEnergies, and ONGC do the same, the math gets easier. As the math gets easier the risk comes off. That de-risking process is happening. Since I first bot RIG, the stock has gone up 7X. 

Dayrates will continue to rise and when RIG gets just one customer-paid reactivation, the risk averse will see that speculation regarding customer-paid reactivations has turned to reality. People will see those idle floaters will go from liabilities costing RIG money, to monetized assets making RIG money. As that happens the RIG bandwagon will become very crowded raising the stock price. It just takes time for the lemmings to jump on.