Reed: U.S. rig fleet indicators on the rise

Oct. 20, 1997
U.S. Rig Utilization [78,775 bytes] Total U.S. Rig Supply Demand [77,209 bytes] U.S. Rig Fleet Changes [32,959 bytes] All indicators for the U.S. drilling rig fleet are on the rise, according to the latest annual rig census by Reed Tool Co., Houston. Total U.S. rig utilization increased to 87% in 1997, a 10% gain from the 1996 census. This is the highest utilization rate since 1981. Of the 1,665 available rigs, 1,447 rigs were engaged in drilling activities. During 1982-96, rig utilization
Dean E. Gaddy
Drilling Editor
All indicators for the U.S. drilling rig fleet are on the rise, according to the latest annual rig census by Reed Tool Co., Houston.

Total U.S. rig utilization increased to 87% in 1997, a 10% gain from the 1996 census. This is the highest utilization rate since 1981. Of the 1,665 available rigs, 1,447 rigs were engaged in drilling activities. During 1982-96, rig utilization averaged 61%.

Details were released at the International Association of Drilling Contractors' (IADC) annual meeting in San Antonio this month. The 1997 census began June 23 and ended July 7.

In 1981, 4,703 rigs were active, the highest ever recorded. In 1982, a record 5,644 rigs were available. To be considered active, a rig must be operational within a 45-day period before the end of the census (OGJ, Sept. 22, 1997, p. 48).

Reed's forecast for next year's census is an activity level similar to this year's. Reed predicts that available rigs will rise by about 25 units to 1,690 rigs, but utilization should drop to 86% because the increase in supply will be slightly greater than the rise in demand.

Rig deletions, additions

The U.S. rig fleet had a net gain of 16 rigs in 1997 (see table, this page). This followed 14 consecutive years of year-to-year declines in the size of the rig fleet. Last year, the fleet lost 80 rigs.

In 1997, 58 deletions from the rig fleet occurred because of the excessive capital spending required to refurbish them. In addition, deletions included 28 cannibalized rigs, 18 rigs exported out of the U.S., 17 stacked, and six destroyed.

Rig additions included 72 reactivations, 57 assembled from old and new rig components, and 12 imported into the U.S. There were two newly built rigs during this time, a barge rig and a platform rig. The supply of silicon-controlled rectifier/electric rigs increased by 48 rigs from 1996 to 456. These rigs are currently in high demand.

From 1996 to 1997, deletions and additions by rig type varied as follows:

  • Land rigs increased by three to 1,428.
  • Inland barges decreased by two to 44.
  • Floating rigs (semisubmersibles and drill ships) increased by six to 28.
  • Offshore platform rigs increased by three to 42.
  • Bottom-supported rigs (jack ups and submersibles) increased by five to 123.

Depth capabilites

The available rig-depth distribution for the 1997 census consisted of:
  • 339 rigs capable of drilling deeper than 20,000 ft.
  • 137 rated to 16,000-19,999 ft.
  • 230 rated to 13,000-15,999 ft.
  • 387 rated to 10,000-12,999 ft.
  • 421 rated to 6,000-9,999 ft.
  • 151 rated to 3,000-5,999 ft.
The rig-depth chart on p. 37 shows the historical trends for rig-depth distributions from 1955 to 1997. The 16,000-19,999 ft and 20,000 ft categories are combined into one. The 16,000 ft category is the largest, with 437 available rigs; however, it also lost the most rigs with 1,241 deletions since 1982. The next largest loss occurred in the 6,000-9,999 ft category with 864 rig deletions. This category is currently the second largest, with 421 rigs available.

Consolidation

The number of U.S. contract drillers is still declining. The 1997 Reed rig census counted 270 U.S. contractors in business, a loss of 19 from last year and 420 since 1987.

Ray Peterson, president of Peterson Drilling Co., cited a number of factors that are influencing acquisition and merger activity among drilling contractors. He said publicly traded companies are able to buy privately held companies because capital is readily available.

Peterson also said many contractors have been unable or unwilling to make the necessary investments in order to replace drill pipe, drill collars, engines, and equipment. He said that selling to a competitor was more attractive than spending $500,000 for a string of pipe and drill collars.

Nevertheless, Peterson said that consolidation is not a panacea and that smaller contractors can often out-perform a larger, multi-regional contractor because of concentrated management efforts, employee loyalty, and long-term customer relationships.

Other concerns

In a survey conducted in conjunction with the rig census, drilling contractors reported rig day rates increased by an average of 29%.

The survey also indicates that the number one problem facing the industry is a skilled-labor shortage. Roy Caldwell, president of Reed Tool Co., said that brisk activity and higher rig rates have allowed contractors to increase wages by an average of 11%. However, the industry's long recession has essentially robbed it of two generations of new blood, he said.

The second major concern facing the industry is the shortage of drill pipe. Peterson said that improved cash flow allows contractors to afford the higher price of drill pipe, yet there is a problem with availability. IADC is pressing efforts to eliminate the anti-dumping tariffs on foreign drill pipe that may help with this situation.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.