Tickers in this Article: BP, RDS.A, RDS.B, NBL, SGY, CIE, TOT, RIG, CVX
The moratorium on deepwater drilling in the Gulf of Mexico impacts a broad range of exploration and production companies, and puts a hold on some ambitious exploration and development plans in the deepwater area.

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Gulf of Mexico
If the moratorium is extended, the impact on domestic production of oil and natural gas will also be significant, as this area has come to represent a larger share of total U.S. production over the last decade.

The Minerals Management Service estimated back in 2007 that oil production from the entire Gulf of Mexico would reach 1.7 million barrels of oil per day by 2016. A more optimistic scenario estimate would lead to 2.1 million barrels of oil per day of production by 2016. Current production is approximately 1.5 million barrels per day.

Company Impact
Royal Dutch Shell (NYSE:RDS.A, RDS.B) will see the most impact from the moratorium, as the company had seven wells planned in the Gulf of Mexico. The company was planning to add a minimum of 150,000 barrels per day of production from the development of its deepwater Gulf of Mexico inventory.

Noble Energy (NYSE:NBL) will see its operations at Gunflint and Galapagos impacted by the moratorium. The Gunflint prospect was first known as the Freedom prospect, with the original discovery made by BP (NYSE:BP) in 2008, using the Deepwater Horizon rig owned by Transocean (NYSE:RIG).

It is unclear what the cost will be for the new regulations being considered by the government, but Noble Energy estimates that a 10% increase in costs at these projects will lower returns by 2%. A one year delay in both projects would lower the net present value by approximately $95 million.

Chevron Corp (NYSE:CVX) has not released anything official yet, but wire services are reporting that two wells planned in the Gulf of Mexico are impacted by the ban, and preparations are being made to shut down operations.

Stone Energy (NYSE:SGY) announced that the second well at the Amberjack prospect would be impacted by the moratorium. The Amberjack Field is located in Mississippi Canyon Block 109, and has been producing for many years. Stone Energy planned additional well drilling program here over the next few years.

One smaller company impacted by the moratorium is Cobalt International Energy (NYSE:CIE), which was planning on drilling exploratory wells in the Gulf of Mexico in 2010. Estimated costs are approximately $15 million.

One well was at the North Platte prospect in the Garden Banks block, where the company was the operator with a 60% working interest in the well. Total SA (NYSE:TOT) owned the balance of this well. Also planned was an exploratory well at the Ligurian prospect located in the Green Canyon block.

Bottom Line
There is some hope for these companies as Reuters has reported that the operators of the wells targeted for shutdown can apply for an exemption. The government cited completion wells, disposal wells, water flood wells, or operations needed to maintain reservoir pressure as types that might qualify for an exemption.

The moratorium on deepwater drilling in the Gulf of Mexico will delay the exploration and developments plans of many operators which had counted on this prolific basin for future production and reserve growth. The ban will also slow any effort to be less dependent on foreign sources of oil. (Before jumping into this hot sector, learn how these companies make their money. Refer to Oil And Gas Industry Primer.)

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