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September 23, 2005

Global Oil Day today, Fri., Sept. 23, 2005, 5:38 AM

Rita will plow through the bulk of the Gulf of Mexico (GOM) rig fleet and into the heart of the Texas oil industry during the next 36 hours. Here is the interactive track of the hurricane from the Hurricane Center of the National Weather Service.

Oil traders are keeping their eyes glued to industry data sources like RigZone.com.

RigZone published the link to the oil rigs in the Southern U.S. Here is the link, which you can update by resetting the map.

As you know, oil and gas is one of the biggest industries in the U.S., and the oil field under attack is the crown jewel of America. In addition to the oil producers (GICS 10), the region is the heart of the petrochemical industry of America, which is a major component of the Basic Materials sector (GICS 15).

Thursday's RigZone report summed up the potential damage thusly:

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If Rita is able to inflict as much damage to the offshore rigs in its path as Katrina was, there will be some fairly serious losses to the Gulf of Mexico rig fleet. Approximately 60 rigs stood in the direct path of Katrina, and of those rigs, 8 were damaged severely or lost entirely. That is about 12% of the rigs in Katrina's path. There were an additional 10 rigs that suffered less severe damages, which amounts to another 15% of the rigs in Katrina's path. There are nearly 80 rigs that stand in the direct path of Rita, with fully 25% of those in the area (West Cameron) that is likely to be hardest hit. So, assuming a similar rate of damage for Rita would lead to an estimate of 9 rigs severely damaged and another 12 rigs suffering lesser damages. That is a significant portion of the GOM rig fleet, which is already depleted from the losses suffered by Katrina...

On her journey, Rita will start out passing through the frontier areas of Walker Ridge and Keathley Canyon. From there, she will continue to move northwest across the eastern portions of Garden Banks and the western portions of Green Canyon. These two areas contain a total of only about 40 offshore platforms, but all of these are major deepwater projects such as Kerr McGee's Red Hawk spar and ConocoPhillips' Magnolia field.

After passing through these deepwater areas, Rita will begin to push onto the shallower waters of the continental shelf, first reaching the southern additions of South Marsh, Vermillion, East Cameron and West Cameron. Rita is then likely to continue across the rest of the West Cameron area and reach large portions of the High Island and Galveston areas before making landfall east of the Houston area.

West Cameron, situated south of Lake Charles, LA to the TX-LA border, is likely to be one of the areas hardest hit by Rita and will most likely see some of the worst damage to its offshore installations. This area is one of the most actively producing and explored areas in the Gulf of Mexico. It has the third highest number of unmanned offshore platforms and the fifth highest number of manned platforms of any area in the GOM, with a total of 292 unmanned and 88 manned platforms. Additionally, there are a total of 22 mobile offshore drilling rigs in the West Cameron area, including 19 jackups, 2 submersibles, and 1 platform rig. Of those rigs, 10 of them are owned and managed by TODCO, The Offshore Drilling Company, which is the rig manager with the most rigs facing possible damage from Rita.

In addition to 22 rigs located in West Cameron, there are another 50+ rigs in the areas that are likely to be affected by Rita. A total of 16 semi-submersible rigs are located in the Walker Ridge, Garden Banks, and Green Canyon areas that Rita will be passing through late Thursday and early Friday morning. Closer to shore, there are 25 jackup rigs in the areas of High Island, East Cameron, Vermilion, and Galveston that will be catching much of the force of Rita mid-to-late-day on Friday."

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There are three major companies mentioned in this RigZone report: TODCO (NYSE: THE), ConocoPhillips (NYSE: COP), and Kerr McGee (NYSE: KMG). It makes good sense for traders to watch these share prices closely today to determine how badly Rita is behaving. The best market intelligence that money can buy will be fed directly into the equity market today.

TODCO (THE) 30-minute chart

ConocoPhillips (COP) 30-Minute chart:

Kerr-McGee (KMG) 30-Minute data chart:

Oil futures traders will have different hours of trading to observe this weekend. I have never before seen that. Last evening, I was alerted of the following:

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Bill, FYI, 5:55 pm PST

Just received this message from Barchart.com as I logged in to check charts:

"URGENT: Notice of Temporary Change in Trading Hours on Sunday, September 25, 2005, for Specified NYMEX Products.

Please be advised that, FOR THIS WEEKEND ONLY, due to Hurricane Rita, the Exchange has determined to implement the following temporary changes in listed hours for the NYMEX ACCESS, and for the NYMEX e-miNY products listed on the CME Globex trading system:

The trading sessions for NYMEX energy products listed on NYMEX ACCESS and both NYMEX e-miNY products listed on the CME Globex trading system will commence at 10:00 a.m. EST (with a market pre-open at 9:40 a.m. EST) on Sunday, September 25, 2005, and continue through to the end of the regular overnight sessions for these products."

/S"

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It is almost certain that all electronic oil exchanges will be open during the mid-day Sunday in addition to the regular late-Sunday evening hours. Recall my comments a couple days ago about the need to trade electronically 24x365.

But for today, capital markets will be all about Rita, not just for Texas and Louisiana, but also for the world. You might even refer to today as Global Oil Day.

Nothing about Rita will be celebrated. However nothing much else will be going on.

Posted by Posted by Bill Cara on September 23, 2005 05:38:25 AM | Category: 10 Energy

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