US oil and gas sector faces risks, slow growth in 2011

It has been well over two months since the US Government lifted its moratorium on deepwater drilling in the Gulf of Mexico which had been in place since the tragic Deepwater Horizon disaster in April of 2010. Even with the ban lifted, oil companies continue to wait for approval to resume drilling. President Obama's administration says that it is trying to enforce new and stricter safety regulations to prevent another catastrophe similar to the one that took place in the Gulf last year. The Wall Street Journal recently said experts believe oil & gas companies may have to wait until the latter half of 2011 or maybe even 2012 to resume drilling in the Gulf. 

US Interior Secretary Ken Salazar said that the new rules imposed after last April's deadly Deepwater Horizon Disaster have strengthened safety measures and cut the risk of another oil spill. The new rules will require companies to get independent certification of the safety of their rig operations. The companies must also have plans in place for recognizing potential hazards to help prevent human errors in all phases of activity. Likely the most costly of the new rules is one requiring rig owners to be responsible for paying for audits, which will oversee the dependency of blowout preventers.

The moratorium certainly hurt revenues for the oil & gas sector, as many companies have significant investments tied up in Gulf projects, most of which have been put on hold.

Even with the Gulf of Mexico drilling halt, Integrated Oil & Gas companies have continued posting relatively strong earnings -- aided in no small part by the higher crude prices. It is well noted that oil prices and the dollar have an inverse relationship because the rising dollar makes oil more expensive to holders of other currencies. With the eurozone debt crisis still garnering significant headlines, analysts have warned that the dollar's strength against the euro may eventually send crude oil prices down.

The Bedford Report examines the outlook for companies in the Major Integrated Oil & Gas Industry and provides research reports on Chevron Corporation (NYSE: CVX) and ConocoPhillips (NYSE: COP). Access to the full company reports can be found at:

www.bedfordreport.com/2011-01-CVX

www.bedfordreport.com/2011-01-COP

The Bedford Report provides Analyst Research focused on equities that offer growth opportunities, value, and strong potential return. We strive to provide the most up-to-date market activities. We constantly create research reports and newsletters for our members. The Bedford Report has not been compensated by any of the above-mentioned publicly traded companies. The Bedford Report is compensated by other third party organizations for advertising services. We act as an independent research portal and are aware that all investment entails inherent risks. Please view the full disclaimer at http://www.bedfordreport.com/disclaimer