By OGJ editors
HOUSTON, Mar. 17 -- Oil and natural gas companies are taking a short breather after a recent run-up in drilling and workovers, and drilling activity is expected to resume upward soon in the US and Canada, UBS Warburg LLC said in its monthly PatchWork Survey.
Drilling and workover activities remain at high levels, but no more so than in the past 2 months, said the March survey, which was taken in late February. The survey gauges near-term commodity prices, oil field activity, and oil field services and product pricing. Data come from oil company operating personnel.
The survey responses underpin an index pegged to a weighted average ranging from 100 to -100. The size of a positive value indicates the relative sentiment for an increase in that price or activity, and the converse is true for the negative values.
Flat for now
Operators participating in the survey said that activity levels in the US, Canada, and elsewhere in the world are expected to remain relatively flat with current levels for a short time.
"In (the US and Canada), the spending index dropped to 33 from 47 last month but was approximately the same as the level we saw 2 months ago. Although the trend is down from last month, the absolute level is still quite high relative to historical levels," analyst James Stone said.
The spending index outside the US and Canada fell to 47 in the March report from 50 in February "but that small of a change from the international arena is fairly inconsequential, and we consider the trend to be flat," Stone said.
The survey index for drilling plans in the US and Canada was 39 compared with 44 for the February survey. Elsewhere, the drilling index dropped to the level seen 2 months ago—falling to 27 from 47 last month.
"We expect North America to take a breaker from the recent increase in activity, and we may see some weakness overseas," Stone said.
The workover trend followed that of drilling. The US and Canada workover trend was flat at 21 this month compared with 28 last month. Elsewhere, the index dropped to 21 from 38 last month, but UBS Warburg noted international numbers historically are more volatile because of the lower survey response rate from operators.
Regarding seismic activity, the US and Canada index dropped to -14 after being positive the last 2 months. But the industry is more optimistic regarding seismic activity elsewhere. Outside the US and Canada, the index climbed to 21 from 7 last month and -10 in January.
Pricing expectations
Pricing expectations shifted higher in the US and Canada to 33 compared with 14 in
February. Rig rates showed the strongest increase from month to month followed by wireline logging and tubulars, but operators expect price increases in every product and service category, the survey results showed.
Outside the US and Canada, pricing expectations retrenched to levels seen during the last half of 2002. The index dropped to 15 in March from 33 in February.
Near and midterm outlook
Both 6 and 12 month sentiment indicators remained optimistic although the trend outside the US and Canada dropped significantly.
For the US and Canada, the 6 month outlook was 6.4, flat with last month. The 12 month outlook was 6.9, up slightly from last month. Elsewhere, the 6 month outlook fell to 6 from 6.3 last month, and the 12 month outlook fell to 5.1 from 6.8.