Regional report: Gulf of Mexico

Much of the current crude oil pricing storm ends at the water’s edge—at least in the short term. The Gulf of Mexico (GOM) market is relatively sheltered from price volatility in fundamental ways, from the reservoirs to project size, and operator staying power. But with a drop from $107.95/bbl on June 20, 2014, to an early-March 2015 price of $49.59, everybody’s boat is taking on water. Cost-cutting measures in the GOM bloomed overnight, and pressure on service companies is expected to grow, the longer oil prices remain depressed. Some current projects may see delays, and the viability of future projects will be put into question. The recent Central GOM lease sale, where high bids were down 37% from last year’s sale, scatters a few dark clouds on the horizon.

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