Oil production in the Gulf of Mexico shows resilience

June 6 (UPI) -- With crude oil prices in May holding above the $50 mark, analysis finds the U.S. Gulf of Mexico saw gains in exploration and production activity.

Platts RigData, a forecasting unit within pricing group S&P Global Platts, revealed a total U.S. rig count for May at 1,026, up 6 percent from the previous month and more than double the level from one year ago.

The U.S. waters of the Gulf of Mexico were the only production centers in the United States to show a decline in rig activity from last year, with the May level of 36 down 16 percent from last year, but a slow recovery is apparent.

Eight new fields in the U.S. waters of the Gulf of Mexico started producing oil last year, leading to a high-water mark of 1.6 million barrels per day, beating the previous record set in 2009 by 44,000 bpd. By January, regional offshore production was up another half million barrels on a daily basis.

A March report from analytical group Wood Mackenzie found the cost to break even on oil and gas projects in deep waters, the U.S. Gulf of Mexico in particular, has dropped from around $70 per barrel to below $50 per barrel in some cases. Since 2014, Wood Mackenzie estimates the average cost to develop deep water projects has dropped more than 20 percent.

Meanwhile, a report from the U.S. Energy Information Administration said that, because of the time it takes to get offshore operations up and running, the Gulf of Mexico is less vulnerable to large swings in oil prices.

The rig count in the Gulf of Mexico from April was up nearly 6 percent. Rig counts serve as a loose metric to gauge the appetite for spending on exploration and production in a particular sector.

The EIA in its monthly market report for May estimated first-quarter production from the Gulf of Mexico averaged 1.73 million bpd, up 7 percent from last year. The federal government estimates first quarter 2018 production from the Gulf of Mexico at 1.91 million bpd.