By OGJ editors
HOUSTON, May 23 -- US drilling activity continued to climb, up 10 rotary rigs to 1,050 working this week, the largest number of units drilling in some 19 months, Baker Hughes Inc. reported Friday. The US rig count during the same period a year ago was 859.
Land activity accounted for the biggest increase, up 8 units with 923 rigs working this week. Activity in inland waters increased by 2 rigs to 14. Offshore drilling was unchanged at 109 units working in the Gulf of Mexico and 113 in US waters overall.
Canada's weekly rig count jumped by 92 to 191 units active this week, up from 134 in the same period last year.
Natural gas drilling
The number of rigs drilling for natural gas in the US increased by 14 to 882 this week, while oil drilling was down 4 units to 164. There were 4 rigs unclassified.
"The recent pullback in gas development drilling activity has been reversed," said Paul Horsnell, J.P. Morgan Securities Inc., London, in a report issued Wednesday. He said development drilling for US gas was up 27.6% from year-ago levels through May 16, while gas exploration was down 20% for the same period.
"Oil activity remains extremely muted," Horsnell said. Oil development drilling was up 1.7% from the same time last year, he said, but down 40% from 2 years ago.
"Over the last year, the only source of (oil) activity growth has been Texas," he said. "Oil activity is significantly lower, compared with a year ago in Louisiana, down 42.9%; California, down 38.9%; and the federal waters of the US gulf, down 90.9%."
Among rigs working in the US, directional drilling increased by 2 units to 271 this week. However, horizontal drilling declined by 5 to 70.
New Mexico was the major gainer this week, up 5 rigs for a total of 75 working. That was followed by a gain of 4 rigs in Wyoming to 52. Louisiana's rig count increased by 3 to 159. Alaska was up 1 to 10, while Texas was unchanged with 467 rotary rigs working this week. The number of rigs working in Oklahoma declined by 1 to 131. California was down 4 to 15.
Rig utilization in the US Gulf of Mexico remained unchanged for the second consecutive week, said officials Friday at ODS-Petrodata, Houston. Of the 182 mobile offshore rigs available for work in the gulf, 129 are under contract for an utilization rate of 70.9%.
In European waters, the number of contracted rigs increased by 2 to 88 out of the 100 available, boosting utilization to 88%. However, worldwide utilization was unchanged at 81.6% this week with 537 mobile offshore rigs contracted out of a total fleet of 658.
2002 finding costs
Despite an estimated 10-15% drop in costs of oil field services, the aggregate fully-loaded finding costs of 57 oil and gas independents increased by more than 30% last year to nearly $9.80/boe, compared with $7.40/boe in 2001 and a 5-year average of $6.85/boe, Robert S. Morris reported Thursday for Banc of America Securities, New York.
"The significant uptick primarily reflects the degradation of the independents' prospect inventories around the globe, which was underscored by a significant drop in proven reserves added per successful well," said Morris.
Aggregate exploration and development (E&D) costs, excluding reserve revisions and acquisitions, among those independents averaged nearly $12.70/boe in 2002, up 65% from 2001 levels, he said.
"The significant increase was underscored by a nearly 40% drop in total proven reserves added per successful well, which fell to near a 10-year low of just over 200 million boe/well," Morris said. "This is partly a result of producers depleting their drilling inventories as they have shifted their focus away from exploration toward development drilling over the past few years, in an attempt to boost or sustain near-term production growth and to improve overall returns."
Exploration spending as a percentage of total E&D costs among Banc of America's study group of 57 independents dropped in each of the past 5 years to 29% in 2002 from 39% in 1998, Morris reported.
"In other words, companies have not been spending the necessary capital to replenish their drilling inventories and no longer have an abundance of quality projects to develop or pursue without having to assume higher 'normalized' commodity prices," he said.
James Stone, an oilfield services analyst at UBS Warburg LLC, New York, recently reported that independent producers have enough good prospects to grow US natural gas production over the next 3 years, if wellhead prices remain above $4/Mcf (OGJ Online, May 16, 2003).
Meanwhile, Morris said, US drillbit costs for independents, excluding revisions and acquisitions, averaged $12.60/boe, up more than 55% from $8.05/boe in 2001. That also reflects degradation of US prospect inventories, underscored by a 35% drop in total proven reserves added per successful well to a 10-year low of 287 million boe in 2002 from 295 million in 2001, he said.
"Interestingly, total proven reserves added per successful domestic well by the independents last year were roughly 25% lower than internationally, illustrating the overall maturity of their US asset base, although only 37% of the independents' reserve additions last year came from outside of the US," said Morris.
Major's F&D costs
However, a study group of eight major integrated oil and gas companies posted a 4% decrease in fully loaded finding and development costs to nearly $5.50/boe in 2002, compared with roughly $5.70/boe in 2001 and a 5-year average of $4.75/boe, Morris said. Among the majors, aggregate E&D costs, excluding revisions and acquisitions, rose nearly 15% to $7.55/boe in 2002, from $6.55/boe in 2001. Proven reserves added per successful well increased by nearly 25% among the majors.
"This primarily reflects the majors' focus on less mature oil and gas basins around the globe, as proven reserves added per successful well domestically for the majors dropped 15% last year, while outside of the US, proven reserves added per well increased roughly 20%," Morris said.
"Thus the rise in drillbit costs for the majors last year was primarily driven by a 45% uptick in E&D costs per well drilled, which reflects the higher cost associated with targeting larger prospects around the globe. In fact, the majors spent 73% of their total capital outlays on international programs in 2002 vs. 63% in 2001," he said.
