Mike
Haven't really switched FGI for VRC since I had FGI and hit my limit while VRC isn't there yet. According to Mavis's dispatch from OTC, Varco may have some nice new innovations. I believe our Dog will be meeting with Mavis in Houston. Hope Ms. Dog doesn't read this stuff.<vbg>
John
Offshore Technology
Conference: Varco Shows Off
Time-Saving Innovation
By Mavis Scanlon
Staff Reporter
5/3/99 7:57 PM ET
Each May since 1969, Houston's famed Astrodome becomes an
oil-patch playground. If a company's business is even remotely
connected to the offshore oil industry, chances are it has set up
camp at the stadium this week for the 1999 Offshore
Technology Conference, which runs through Thursday. Some
1,867 exhibitors, slightly more than the 1,846 in 1998, are
showing off their wares. It's a time for new product
introductions, demonstrations, press briefings and displays of
sheer muscle for industry players.
The Street.com will report the show's highlights this week.
HOUSTON -- Varco (VRC:NYSE) has incorporated two
technological innovations in its latest blow-out prevention
designs -- one of a rig's most important safety systems -- that will
significantly decrease the time spent tooling around with these
systems.
Over the course of a year, these new designs could save an oil
company up to $1.4 million in service costs.
Orange, Calif.-based Varco wasn't spared by the downturn in the
drilling industry. Orders for the first quarter slowed dramatically
compared with the year-ago period, to $72.3 million from
$299.6 million. And despite today's higher oil prices, it will take
some time for orders to pick up again.
But an industry slowdown is no reason to stop spending on
technology, says David Reid, director of marketing for Varco unit
Shaffer. Reid says that, with its new generation of equipment,
Varco is preparing for the upturn. Varco spends about 5% of its
revenues on its research and development efforts, Reid says, a
percentage that amounted to over $37 million in 1998.
It can take up to five days (at as much as $200,000 per day) to
pull a blow-out prevention stack up from the sea bed, Reid says.
Instead of that labor- and time-intensive procedure, any work
that needs to be done to the stack can now be done using
remotely-operated vehicles, Reid says, demonstrating the nifty
innovation on one of several computer screens in Varco's large
exhibit space.
So which companies are taking advantage of the new
equipment? Statoil, the Norweigan state oil company, is
considering using the application in its deep-sea operations and
is testing it in shallower waters. As far as the drillers go, Santa
Fe International (SDC:NYSE) and the drilling unit of Mearsk
are using the new blow-out preventers. Others, like Noble
Drilling (NE:NYSE), are still a tad nervous at using the new
technology. The new designs may have kinks that need to be
worked out; Noble may opt for a later-generation design, Reid
says.
In recent weeks, oil prices have jumped, renewing optimism that
a turnaround in oil company spending may be in the works.
Shares of Varco are up 60% since early March; VRC closed up
7/8, or 7.7%, at 12 3/16 Monday.
Donald Bollinger, chairman of the National Ocean Industries
Association, wants an end to the moratorium on offshore
drilling and development in protected areas.
Access to offshore areas protected under a federal ban on
drilling and leasing is necessary to meet domestic demand for
natural gas, as well as to maintain the competitiveness of the
U.S. oil and gas industry, said Bollinger, speaking on a panel
addressing the current state of the industry. Only 18% of the
federal land on the outer continental shelf is available for
leasing, added Bollinger, who is also chairman and chief
executive of the Louisiana-based Bollinger Shipyards.
Bollinger vouched his support for a controversial lease sale
coming up in the eastern Gulf of Mexico, 15 miles off the coast
of Alabama and about 100 miles off the Florida panhandle.
Environmentalists want drilling in this area banned. The
Minerals Management Service, which oversees all offshore
leasing activity, began planning for the sale in January. It's
tentatively set for late 2001 or early 2002.
Drilling access to certain offshore areas is a contentious issue. In
June 1998, President Clinton issued a moratorium on leasing
until 2012 in many areas of the continental shelf, including all
of the eastern Gulf, except the area in the eastern Gulf that's
under consideration.
The facts Bollinger presented to support his argument included
the following: Domestic natural gas consumption is expected to
rise to 30 trillion cubic feet per day in 2010, from 22 trillion
cubic feet per day in 1997, according to estimates from the
federal Energy Information Agency and the Gas Research
Institute. At the same time, domestic production -- almost a
third of which comes from the Gulf -- has been relatively flat.
That means more drilling is needed to make up the shortfall.
The lease sale in the eastern Gulf, the first in that area since
1988, is "the first step in expanding access to domestic offshore
reserves," Bollinger said.
"NOIA members strongly believe there is no legitimate or
logical reason to continue restrictions on offshore leasing and
subsequent exploration and development drilling, and we will
continue to push for sensible legislative and regulatory policies
that ensure access to the nation's offshore hydrocarbons."
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