U.S. Oil and Gas Producer Exposure to Gulf Area Hurricanes

June 1 marks the beginning of Atlantic hurricane season, so it is useful to know which companies have the greatest exposure to possible storms and those that stand to gain if supply disruptions occur.

The most recent forecasts out of the U.S. call for a higher-than-average number of named storms in the next six months, for many of the same reasons cited last year.

But the 2006 season ended up being quieter than expected, primarily because storms did not reach land and therefore caused much less damage than in 2005 when Hurricanes Katrina and Rita ravaged the Gulf Coast.

The largest concentration of offshore oil and gas production is near the coast of Louisiana, while the offshore Gulf of Mexico region accounts for nearly 15% of natural gas production and 32% of crude oil production in the lower 48 U.S. states, according to RBC Capital Markets.

Oil and natural gas independent Apache Corp. (APA) has significant exposure in the Gulf region, with more than 22% of 2006 production and 17% of year-end reserves there, RBC said in a report.

Anadarko Petroleum Corp. (APC) meanwhile, has an estimated 13% of its 2006 year-end reserves in the Gulf of Mexico. Devon Energy Corp.’s (DVN) Gulf properties however, only account for roughly 5% of its proved reserves and 10% of production at that time.

The report also noted much more exposure in terms of reserves and production in the Gulf for names like ATP Oil & Gas Corp. (ATPG), Callon Petroleum Co. (CPE), Helix Energy Solutions Group (HLX), Mariner Energy Inc. (ME) and Swift Energy Co. (SFY).

But while integrated oil and gas companies are indeed at risk from hurricanes in the Gulf, the path of these storms is what really matters as one company can suffer massive damage, while its neighbor could emerge unscathed.

Comments

[athenian:]

Given that this time of year is good for refiners (summer driving), what refinery stocks have the least potential exposure to the hurricane season?

2007 May 31 11:46 AM

[Walter Morton:]

In the WSJ today, they cited data from Colorado State Univ. researcher William Gray released his newest forecast Thursday -- an expectation for 17 named storms and nine hurricanes, five of them intense.
Dr. Gray described 2007 as a very active season. He said there was a 74% chance of a major hurricane making landfall somewhere on the U.S. coast. There is a 50% chance of a major hurricane making landfall on the East Coast, including the Florida Peninsula, according to the new forecast; the long-term average is 31 percent.
The chance of a major hurricane hitting the Gulf Coast between the Florida Panhandle and Brownsville, Texas, is 49 percent; the long-term average is 30 percent. There is also an above-average chance of a major hurricane making landfall in the Caribbean, according to the forecast.

2007 May 31 03:20 PM