By OGJ editors
HOUSTON, Apr. 11 -- The number of rotary rigs working in the US continued to climb this week, amid signs that the upturn in drilling activity should accelerate in coming months.
The total number of drilling permits filed in 30 states increased by 0.4% in March from February, "adjusted for comparable numbers of filing days," said Lehman Bros. Inc. analysts Wednesday. "The non-adjusted total improved by 9%," they said.
Adjusted increases in major drilling states included 17% in Kansas, 12% Oklahoma, 6% New Mexico, and 4% Texas.
Hughes rig count
Baker Hughes Inc. reported Friday that 979 rotary rigs were drilling in the US and its waters this week. That's 7 more than the previous week and up from 747 during the same period a year ago when US drilling activity was in a decline.
The biggest increase this week was in inland waters, up 4 rigs to 18. Land drilling increased by 3 rigs with 859 units working, while offshore operations were unchanged at 97 active rigs in the Gulf of Mexico and 102 for the US as a whole.
Drilling activity in Canada continued its seasonal decline with the spring thaw, down 46 rigs with 175 still working this week. That's up from 127 a year ago.
In the US, the number of rigs drilling for oil decreased by 1 to 186 this week, while gas drilling increased by 8 to 790 active rigs. There were 3 rigs unclassified. Directional drilling was down 5 rigs to 233. Horizontal drilling lost 1 rig to 65 this week.
The Texas rig count jumped by 17 units to 442 working this week, far outdistancing Louisiana that was up 3 to 155. Wyoming increased its rig count by 2 to 39. Oklahoma, New Mexico, and Alaska added 1 rig each for respective counts of 124, 75, and 12. California lost 5 rigs, with 15 still making hole.
ODS-Petrodata, Houston, reported 122 mobile offshore rigs were under contract in the Gulf of Mexico this week, 3 more than last week, out of 182 available, for a utilization rate of 67%. Activity in European waters was unchanged, with 84 mobile offshore rigs contracted out of the 99 available, with 84.8% utilization.
Worldwide, there was a net gain of 3 mobile offshore rigs under contract to 529 out of a total fleet of 658, for 80.4% overall utilization.
Finding and development costs
In a separate report Wednesday, Robert S. Morris at Banc of America Securities, New York, said the aggregate fully loaded finding and development costs among 20 US independents followed by that company "rose roughly 40% in 2002 subsequent to a nearly 30% up tick in 2001, underscored by the continued degradation of project inventories around the globe. This rise occurred despite an estimated 10-15% drop in overall oil field service and drilling costs, on average last year."
Aggregate F&D costs "with the drill bit alone," excluding reserve revisions, averaged roughly $13.20/bbl of oil equivalent last year, "or about 65% higher than in 2001. However, once again, the cost to acquire proven reserves was well below that with the drill bit, at nearly $5/boe last year," said Morris. Such a pricing differential could accelerate the pace of mergers and acquisitions among exploration and production companies, "starting in the second half of this year," he said.
In the US, Morris said, "the aggregate exploration and development tab with the drill bit last year was roughly $13.45/boe, or 60% higher than in 2001. The cost to acquire domestic proven reserves was roughly $5.05/boe.
"Importantly, the continued rise in costs is weighing on economic returns, with our coverage group posting the lowest reserve replacement efficiency ratio since 1998," Morris said. "Consequently, most E&P companies have increased their focus on improving economic returns in 2003."