Seismic activity now lags drilling rigs, analysts say

Rather than being a leading indicator of US drilling activity, the seismic business has become the "lagging result" of drilling activity because improved processing and data gathering technology has created a backlog of drillable prospects, say analysts with Raymond James & Associates Inc.

In the past, increased seismic crew activity typically indicated that drilling activity would follow soon after, said Raymond & James authors J. Marshall Adkins and James M. Rollyson.

They said exploration and production companies would invest in seismic data, then use that information to develop and ultimately drill prospects. Up until 1995, the seismic crew count typically moved up in advance of drilling activity. But as seismic crews began to outpace the number of rigs drilling, the backlog of drillable prospects rose high enough to begin driving the drilling rig count. The backlog of prospects then began shrinking when the rig count increased during 1997.

Seismic companies continued shooting seismic data for their own spec data libraries through 1998, when the rig count began to fall early that year. From early 1998 to mid-1999, an "incredible build" in seismic data grew, as did the implied build of drillable prospects.

"If we assume a constant efficiency relationship between seismic crews and drilling rigs, then the excess amount of drillable prospects should be running out right about now," said Adkins and Rollyson.

Instead, improvements in data processing technology, such as improved computer horsepower and advanced processing algorithms, have allowed exploration companies to process and reprocess more data in less time, meaning that more prospects can be developed per active seismic crew. Advanced data gathering technologies, such as more streamers per seismic vessel, allow more data to be gathered per crew or vessel. The emergence of multiclient data is giving more companies access to 3-D seismic data at lower costs, allowing more prospects generated for the same amount of seismic data.

At the same time, Adkins said that overall drilling efficiencies have deteriorated. "As we continue to try and exploit our mature basins and reservoirs in the US, you're seeing a clear trend of looking for smaller pockets of reserves that are deeper, even though rigs are more efficient and drilling faster."

Their efficiency, which is measured in their ability to generate new oil and gas production, has dwindled as finding larger pockets of oil and gas becomes difficult. "You're going to get more prospects per seismic crew, but the ability of the rigs to drill prospects is still declining."

"It is the combination of these improved seismic efficiency trends that lead us to believe that it will be late 2001 before the seismic business will see a meaningful increase in the number of active crews," the analysts said. They predict that exploration companies will spend more money on processing and existing data libraries to generate drillable prospects for an "exploding level" of drilling activity. "Even though seismic efficiency gains are likely to continue into the future, we are convinced that substantially higher levels of drilling activity over the next five years will lead to a meaningful increase in the number of seismic crews."

Because of the improved seismic crew efficiencies and "tremendous" backlog of data and drillable prospects, Adkins and Rollyson predict that the industrywide seismic crew count wouldn't improve until late 2001. But instead of foundering late next year, seismic companies will probably see gradual improvements in their overall business activity levels over the next 6 to 12 months, the analysts said.

The near-term outlook is favorable for seismic companies due to increased processing and reprocessing of data and the sales of existing library data, but they said it might take several years before the industry seismic crew count returns to 1997 levels. Adkins and Rollyson expect "an exploding drilling rig count" to eventually work off of the high backlog of prospects and lead to meaningfully higher demand for seismic crew activity over time.

Related Articles

Delaware City refinery, Praxair ink deal for carbon dioxide recovery plant

07/17/2015 Delaware City Refining Co. LLC (DCR), a subsidiary of PBF Energy Inc., Parsippany, NJ, has entered a long-term agreement with Praxair Inc. to suppl...

BHI: US rig count falls 6 units to 857

07/17/2015 The US drilling rig count fell 6 units to reach 857 during the week ended July 17, essentially cancelling out the last 3 weeks’ worth of gains, acc...

Aussie, Timor-Leste regulators terminate Timor Gap permit

07/17/2015 Regulators in Australia and Timor-Leste have now formally terminated Timor Gap production-sharing contract JPDA 06-103, which leaves Australian com...

Husky begins production at Rush Lake heavy oil project

07/17/2015 Husky Energy Inc., Calgary, reported startup of production from its Rush Lake heavy oil thermal project in Saskatchewan, some 8 weeks after startup...

ENOC trims Turkmen plan in Dragon takeover

07/16/2015 Emirates National Oil Co. Ltd. (ENOC), Dubai, will lower target oil production from the Cheleken area offshore Turkmenistan after acquiring full co...

Mexican round nets two successful bids

07/16/2015 Two of 14 shallow-water blocks received successful bids on July 15 in Mexico’s historic Round One offering of exploration and production rights (OG...

CAPP: Canada needs global LNG markets for gas production growth

07/16/2015 Canada needs to connect to global LNG markets to avoid a decade of decline in natural gas production, according to the Canadian Association of Petr...

KMI brings second Texas condensate splitter online

07/15/2015 Kinder Morgan Inc., Houston, has commissioned the second of two splitters at the company’s new petroleum condensate processing facility located nea...

Group starts radio frequency pilot for oil sands at Dover in Alberta

07/15/2015 The first radio frequency pilot for oil recovery within an in situ reservoir is under way in the Dover area north of Fort McMurray, Alta. In a test...
White Papers

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by
Available Webcasts


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected