U.S. oil major Chevron Corporation
(CVX - Free Report
) is ready to dive into the UK waters of the North Sea, following the drilling permission granted by the British government. Accordingly, Chevron will drill the first deepwater exploration well in the region on the Lagavulin prospect.
The Lagavulin prospect is situated to the north of the Shetland isles off the Scottish coast. Chevron expects to find oil at a depth of 5,147 feet of water. The exact date for the commencement of drilling has not yet been disclosed.
On April 20, the Deepwater Horizon rig of BP plc
(BP - Free Report
) exploded, killing 11 people and sparking the worst oil spill in U.S. history. Soon after, the U.S. government imposed a deepwater drilling moratorium.
Britain, on the other hand, argued on continuing to pursue off-shore drilling activity on the basis of strong safety and regulations regimes. The Department of Energy and Climate Change commented that drilling rules and guidelines are much tougher in the North Sea and every precautionary measure will be implemented to evade any catastrophe.
According to Chevron management, extensive pre-drilling research has been undertaken and the company will diligently fulfill all the safety criteria.
Chevron has successfully drilled 375 deepwater wells across the globe since 1987 (including 75 in the Gulf of Mexico and 18 in the UK, west of Shetland) without any major mishap.
However, international environmental organization Greenpeace has criticized the government decision to permit deepwater drilling. Greenpeace has addressed Britain’s move as an “irresponsible one, given the delicate natural habitat and underwater life of the North Sea region.
With court orders deterring their protest campaign in the last week, Greenpeace has now decided to take legal action against the government in an effort to prevent new permits for deepwater drilling.
Chevron currently retains a Zacks #3 Rank, which translates into a short-term 'Hold' rating. We are also maintaining our long-term Neutral recommendation on the stock.