By OGJ editors
HOUSTON, July 25 -- US drilling activity increased by 2 rotary rigs to 1,091 working this week, the largest weekly rig count since early October 2001, officials at Baker Hughes Inc. reported Friday.
The current rig count is up sharply from the 833 units working during the same period last year, when the count rose or fell in weekly spurts of 15-26 rigs.
This week's small uptick was primarily in offshore operations, up 2 rigs to 104 working in the Gulf of Mexico and 108 in US waters as a whole. US land drilling increased by 1 rig to 967, but activity in inland waters decreased by 1 unit to 16.
There were 424 rotary rigs working in Canada this week, 12 more than the previous week and up from 264 a year ago.
Among US rigs, those drilling for oil increased by 4 to 158, while the number drilling for natural gas was down 2 to 930. Directional drilling increased by 5 units to 277, and horizontal drilling was up 3 to 96 rigs.
Oklahoma was the big gainer this week, up 8 rigs to 139 working. Louisiana increased by 2 to 159 rigs, and California was up 1 to 22. Alaska was unchanged with 8 units working this week. Drilling in Texas declined by 3 rotary rigs to 471 working. New Mexico was down 2 to 60 active rigs. Wyoming lost 1 to 61.
In the US sector of the Gulf of Mexico, the number of mobile offshore rigs under contract increased by 2 to 128 while the number available for work decreased by 2 to 173. As a result, the rig utilization rate rose by 2 points to 74% in those waters, said officials Friday at ODS-Petrodata, Houston.
The number of contracted rigs in European waters was down 2 to 81 out of a total fleet of 100, for a utilization rate of 81% this week. Worldwide, the number of mobile offshore rigs under contract showed a net increase of 3 to 523 out of a total fleet of 653, for a global utilization rate of 80.1%.
Second quarter drilling
US drilling activity increased by 14% to a weekly average of 1,025 rigs during the second quarter of 2003 from an average of 899 in the first quarter, said Patrick McGeever, an analyst at Fitch Ratings Ltd. The average number of rigs drilling for natural gas grew by 15% in the latest quarter, while the average number drilling for oil was up 11%, he said.
The average number of jack up rigs under contract in the Gulf of Mexico increased by 6% to 85 during the second quarter, for an average utilization rate of 75%, up from 69%, he said, based on information from ODS-Petrodata.
"The utilization improvement in the Gulf of Mexico for jack ups is attributed to another three jack ups that were mobilized outside of the region and five additional contracted rigs," McGeever said. "The average day rate for jack ups in the Gulf of Mexico remained unchanged at about $25,000/day.
Among semisubmersible rigs available for work in the gulf, utilization rates remained unchanged at about 60% in the second quarter. "But day rates fell noticeably," McGeever said. "Day rates in the second quarter averaged approximately $91,000, a decline of 9% from the first quarter."
Most of that decline occurred in June "when the average semisubmersible generated about $86,000/day," he said. "However, demand in June indicated a pickup in activity, as there were 24 semisubmersibles active at month's end, an increase of 20% from May."
Well completions
An estimated 8,286 wells and dry holes were drilled in the US during the second quarter of 2003, up from 6,897 during the same period last year, said officials at the American Petroleum Institute.
During the latest quarter, natural gas well completions increased by 19% to 4,965, while oil well completions were up 28% to 2,248. The number of dry holes drilled also increased during the second quarter, up 13% to 1,073, API reported July 16.
Completions of exploratory wells dropped by 6% during the quarter, while development well completions were up 22% from a year ago. API estimated the total footage drilled during the second quarter at 46.994 million ft, a 32% increase from the same period a year ago. Total estimated footage drilled for oil wells is the largest in 2 years, while estimated footage for gas wells during the quarter was the second highest ever, API officials said.
However, second quarter earnings among oil field service companies are not expected to be "overly impressive," although "results should be higher than (in the first quarter) due to a higher North American land count and slightly increased activity in the Gulf of Mexico," said Grant Borbridge, an analyst in the Palo Alto, Calif., office of Prudential Financial, a subsidiary of Prudential Securities Inc.
Service companies involved in North American land operations "should report slight increases in pricing," compared with first quarter results, said Borbridge. The weekly US land rig count averaged 905 active units during the second quarter of this year, up from a first quarter average of 770. But despite a 30% increase in the rig count during the first half of 2003, there have been only "minimal" increases in pricing by service companies.
"However, we expect a much more positive outlook on margins on a go forward basis," Borbridge said in a July 14 report.
As for North American offshore activity, he said, "Our calculations reflect effective utilization in the Gulf of Mexico approaching 85%, as five rigs were taken offline while demand has increased by six rigs since January. We believe the lower availability of rigs along with the increase in demand should encourage offshore rig pricing increases."
There should be "slight evidence" of day rate increases in the second quarter earnings reports by offshore drilling contractors. "However, we are more concerned with day rate and utilization guidance looking forward, which we anticipate to be positive," Borbridge said. "We believe we have reached an inflection point for an increase in Gulf of Mexico offshore activity, as indicated by the upward trend in the number of offshore drilling permits being issued in the past 4 months."
He said, "Given the tight domestic natural gas inventory outlook, we expect natural gas-focused US drilling activity to continue to gradually increase through the second half of 2003 in order to regain natural gas production (roughly down 6% in 2002 over 2001) to supply the 2003 winter demand season."
