US, Canada drilling to rise as oil, gas prices moderate

Jan. 29, 2001
Drilling in the US and Canada should post a healthy increase this year even as average oil and gas prices moderate compared with 2000 prices.
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Drilling in the US and Canada should post a healthy increase this year even as average oil and gas prices moderate compared with 2000 prices.

Oil & Gas Journal forecasts an approximate 6% pick-up in drilling this year in the face of 9-10% declines in oil and gas prices at the wellhead.

Individual public companies have announced plans to boost capital and exploration spending 5-15% in 2001, but OGJ does not expect the industry average to reach double digits.

Nevertheless, US operators should have ample funds for drilling and completion based on prices at the wellhead that averaged $27.23/bbl for oil and $3.85/Mcf for gas in 2000 and remain high as 2001 begins.

A rig count that averaged 918/week for the full year in 2000 was the highest since 943 rigs/week in 1997 and the second best showing in the 1990s. OGJ's forecast 950 rigs/week for 2001 would be only 7 rigs better than the decade's best year.

Here are highlights of OGJ's early-year drilling forecast for 2001:

  • Operators will drill 27,550 wells in the US, up from an estimated 25,945 wells drilled in 2000.
  • All operators will drill 3,445 exploratory wells of all types, up from an estimated 3,029 last year.
  • The Baker Hughes count of active rotary rigs will average 950/week this year, up from 918/week in 2000.
  • Operators will drill almost 19,000 wells in western Canada, up from 16,596 last year.

US forecast

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Based on oil and gas prices in effect in the field, US producers should have enjoyed wellhead revenues of more than $129 billion in 2000.

That figure exceeds revenues in every year of the 1990s and is almost double 1995 revenues.

At 25,945 completions, 2000 activity exceeded that of almost every year in the 1990s. Only 1990, 1991, and 1997 had more completions. OGJ forecast 27,840 completions for the year 2000 last July but now believes this was optimistic (OGJ, July 24, 2000, p. 86).

Actual drilling and completion cost figures are not yet available for year 2000, but OGJ does not believe such costs moderated from 1999 per-well and footage costs which the American Petroleum Institute characterized as the highest on record (OGJ, Nov. 27, 2000, p. 36). The 1999 records: $856,149/well and $152.02/ft. The figures included oil wells, gas wells, and dry holes as well as both land and offshore drilling.

US drilling patterns

Drilling primarily for gas has dominated US activity in recent years.

More than 75% of the 1,114 rigs in the closing week of 2000 were seeking gas.

It is increasingly difficult to use the number of permits to drill issued by states as an indicator of the number of completions in a given year. OGJ estimates that wells were drilled in 2000 on only 65-75% of the sites that received permits.

Roughly 15% of the well completions in 2000 and 2001 will have been shallow gas wells in a coalbed methane play in the Powder River basin of Wyoming, OGJ reckons.

Texas should host 7,184 wells in 2001 versus just over 6,800 in 2000.

New Mexico is likely to see 1,250 completions in predominately oil areas in the southeastern part of the state and 737 mainly gas completions in the northwestern counties.

Louisiana's outlook is for 1,595 wells, including 670 offshore efforts.

California should see drilling of 1,175 wells, most of them in the Kern County heavy oil fields, and 42 exploratory tests of all types statewide.

In the Midcontinent, OGJ expects 2,679 wells to be drilled in Oklahoma and 1,415 in Kansas.

OGJ projects that 145 wells will be drilled in Alaska this year, up from 129 in 2000.

Canadian activity

The number of wells drilled is also far below the number of licenses issued in Canada.

OGJ's western Canada drilling figure of 16,596 wells for 2000 is far below the estimated number of wells licensed for drilling. That number probably exceeded 20,000 licenses.

OGJ's outlook is for higher numbers of exploratory wells and a higher percentage of exploratory wells to total drilling in Canada than in the US.

Rig statistics showed that Canadian drilling is not as skewed toward gas as is drilling in the US.

Eastern offshore wells in the accompanying table include those drilled off eastern Canada, including the Grand Banks, Scotian shelf, Gulf of St. Lawrence, and Lake Erie off Ontario. Drilling is permitted for gas only in Lake Erie. Eastern land wells include those drilled in and east of Ontario.