Drill, Drill, Drill: My Interview with Diamond Offshore Drilling CEO Larry Dickerson

The following is an unofficial transcript of my interview last night with Larry Dickerson. Mr. Dickerson is the CEO of Diamond Offshore Drilling.

Kudlow: Alright, more on drill, drill, drill. The question is how deep? How much? How green? Here’s Larry Dickerson, CEO of Houston based Diamond Offshore Drilling. Larry, great to see you. Just to put a quick picture up on the full screen, your stock has been off the charts in the last three or four years. I got you up 500 percent. Your profits are growing near 70 percent per year, with 30 percent annual growth in sales. Welcome to the show. Now I want to ask you. Okay, we had on CNBC one of those cute looking greenies, tree huggers were on, and they were debating somebody about this drilling business. And they say, ‘Okay, you drill offshore, outer continental shelf, you’re gonna wreck the beaches of the coastal states. You’re gonna ruin the tourist trade and destroy their economies.’ What’s your response?

Dickerson: Well Larry, there hasn’t been any significant – even insignificant that I can think of – oil spill from U.S. waters in over thirty years. We have an excellent environmental record. The amount of redundancy testing and government regulation put in place I think all but eliminate that as a possibility.

Kudlow: So they’re basically just mau-mauing the business, the drillers. They’re mau-mauing the oil companies. They’re mau-mauing the American people, right?

Dickerson: Well, I suppose there’s some logic to that. But at the end of the day, there’s the issue of supply and there’s the issue of jobs. People are paying $4 dollars a gallon for gasoline and we can recycle significant parts of that back to the economy in jobs – high paying blue-collar jobs and white collar jobs. We can recycle that through taxes. As Secretary Kempthorne said, a lot of that could go back to the states and help them with their budget problems.

Kudlow: How far offshore can you go? You’re a deep-water driller aren’t you?

Dickerson: Yeah, our deepest rigs can go 10,000 feet of water.

Kudlow: How many miles out?

Dickerson: Oh, we’ll go right out to 200. It really depends on the water depth, of how far it is. In some parts of the world it’s pretty shallow.

Kudlow: What’s out there Larry? There estimates of 86 billion barrels out there. Is that true?

Dickerson: Well, we really don’t know. All we’ve really significantly explored or really looked at with seismic is in the central and western parts of the U.S. Gulf of Mexico. I suppose that estimate is as good as any. But until we get out and work off the eastern Gulf and work up and down the Atlantic Coast and California’s been shut in for many years, I just don’t think we’ll know. But the history has been that there’s always been more than the initial estimates indicate.

Kudlow: If Congress gave you the green light tomorrow – which they won’t – but if they gave you a green light to drill offshore, how long would it take you to start lifting oil?

Dickerson: Unfortunately that is going to be some period of time. Demand is such all over the world that we’ve been taking rigs out of the U.S. Gulf. There’s probably 30 percent less rigs at work today than there was even three years ago. And the rigs that we have are booked up quite a bit in advance. So we’d have to do that. But while we were building new rigs, or relocating rigs here, our oil company customers would be doing the seismic and would be getting ready for that. So I would guess that it would be, by the time they got the studies and all that, drill bits wouldn’t be going into the ground for a couple years. And then maybe another couple years after that.

Kudlow: So four or five years?

Dickerson: Yeah probably.

Kudlow: So wouldn’t the futures traders who are much maligned, wouldn’t they pick that up right away? They see you going out there, they see you mobilizing. Wouldn’t the traders start lowering the futures prices? Those futures markets go out, heck, they go out ten years.

Dickerson: Well it certainly couldn’t hurt. But it’s going to require a number of efforts all across the board. We’re not ruling anything out. But to take this action [against drilling], which is not followed in any other part of the world, and to take it off the table, just doesn’t make any sense to me.

Kudlow: Well no other country is so dominated by greenies, and mau-maued by greenies. But let me just ask you Larry, is there a twitter, is there a buzz about the McCain statement and the Bush statement? What are your colleagues saying in the drilling business?

Dickerson: Well I think we’re encouraged. But I mean, we’ve been down this for twenty years of ups and downs. But certainly this is a significant step forward. And as far as we’re concerned, you’ve indicated what our stock price and our income have done, primarily off some limited Gulf of Mexico, but off the rest of the world. So we’re going to do okay. But we would like to see jobs remain in America. We’d like to help this country out on this issue.