Biden's Offshore Drilling Ban: Impacts and Industry Outlook

President Joe Biden has taken a significant step to reshape U.S. energy policy by banning new offshore oil and gas drilling across 625 million acres of federal waters. This sweeping prohibition, enacted under the Outer Continental Shelf Lands Act, aims to protect sensitive marine ecosystems while supporting climate goals. However, the policy has drawn sharp contrasts with the pro-drilling stance of President-elect Donald Trump, who has pledged to boost domestic energy production.

For offshore drilling-focused firms like Transocean RIG, Seadrill SDRL and Valaris VAL, the policy adds uncertainty. While such firms continue to benefit from existing projects in these regions, the lack of new leasing opportunities could pressure long-term growth.

Key Features of Biden’s Ban

The ban encompasses critical coastal regions, including the Atlantic and Pacific coasts, the eastern Gulf of Mexico, and portions of Alaska’s Northern Bering Sea. Biden’s decision reflects concerns over environmental disasters like the Deepwater Horizon spill and aligns with federal goals to conserve 30% of U.S. lands and waters by 2030.

Biden argued that the targeted areas have minimal fossil fuel potential, making environmental and public health risks unjustifiable. Yet, existing leases in the Gulf of Mexico, where most U.S. offshore drilling occurs, remain unaffected.

Contrasting Views: Biden vs. Trump

While Biden focuses on conservation and transitioning to renewable energy, Trump plans to reverse these measures, promising expansive drilling projects. Trump’s “Drill, Baby, Drill” agenda aims to establish U.S. energy dominance by approving new drilling and pipeline projects while rolling back green initiatives.

Notably, Trump criticized Biden’s actions as “politically motivated” and vowed to “unban” the drilling restrictions immediately. However, legal hurdles tied to the Outer Continental Shelf Lands Act may make reversing these protections challenging without congressional approval.

Mixed Reactions to the Ban

Environmental groups celebrated the decision, hailing it as a victory for climate action and coastal preservation. Oceana Campaign Director Joseph Gordon called it an “epic ocean victory,” emphasizing the importance of safeguarding marine habitats for future generations.

Conversely, the oil and gas industry argued that the ban undermines U.S. energy independence. The American Petroleum Institute urged Congress to overturn the decision, citing potential economic and energy security risks. Some experts also noted that the protected regions have limited immediate appeal to drillers, making the move symbolic for now.

Companies That Could be Affected

While most offshore drilling firms will come under the purview of the proposed regulations, we look at three of the biggest names in the space:

Transocean: This Zacks Rank #3 (Hold) Ranked company provides rigs on a contractual basis to explore and develop oil and gas. Transocean offers offshore drilling rigs, equipment, services and manpower (with particular emphasis on ultra-deepwater and harsh environment drilling services) to exploration and production companies worldwide. Transocean's fleet is considered one of the most modern and versatile in the world due to its emphasis on technically demanding segments of the offshore drilling business.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Seadrill Limited: This company is a market-leading international driller with strong exposure in key strategic basins like the U.S. Gulf of Mexico, Brazil and Angola. Following the Aquadrill LLC acquisition last year, SDRL has significantly improved its cash flow generation potential.

Valaris Limited: Valaris possesses a varied fleet of rigs, including ultra-deepwater drillships, versatile semisubmersibles, and modern shallow-water jackups. With the industry's largest and highest specification fleet covering both floaters and jackups, Valaris maintains a significant presence in key offshore basins.

The Way Forward for Offshore Drillers

Despite the near-term challenges, offshore drillers are likely to adapt by optimizing existing operations and exploring opportunities abroad. The Gulf of Mexico remains a hub for activity, and emerging markets could provide new growth avenues. Meanwhile, the shift toward renewable energy offers potential diversification strategies for companies willing to innovate.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 
Transocean Ltd. (RIG): Free Stock Analysis Report
 
Valaris Limited (VAL): Free Stock Analysis Report
 
Seadrill Limited (SDRL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

This article contains syndicated content. We have not reviewed, approved, or endorsed the content, and may receive compensation for placement of the content on this site. For more information please view the Barchart Disclosure Policy here.