By OGJ editors
HOUSTON, Aug. 8 -- US drilling activity plunged this week, down by 23 rotary rigs to 1,074 still working, officials at Baker Hughes Inc. reported Friday.
It marks the biggest 1-week loss since early November 2002, when the US rig count dropped by 28 units to 826. During the first week of August 2002, there were 854 rotary rigs working in the US and its waters.
This week's drop was the result of several "temporary" factors, such as some rigs being moved to new drilling sites and others drilling shallower wells than the 3,500-5,000 ft minimum—"depending on the district"—required for the Baker Hughes rig count, officials said. "We're not worried. It will come back up," a company spokesman told OGJ Online.
No impact from Anadarko
Houston-based Anadarko Petroleum Corp. rattled the oil services industry with its July 31 announcement that it would eliminate 400 jobs and close offices in Amarillo and Midland, Tex., to cut its annual costs by $100 million (OGJ Online, Aug. 1, 2003).
The company also said it dropped at least seven land rigs last week as some of its planned drilling projects were completed. "That's the nature of our business. We were down to 25 rigs at the end of last year before going back up to 66," said a company representative.
However, other industry sources reported that the rigs released by Anadarko were offset by increased demand for rigs among other independents, with no apparent effect on the total US drilling activity.
EOG Resources Inc., Houston, this week announced plans to increase its active rig count by 56% to 50 in the second half of this year because of the bullish outlook for the US natural gas market.
The company raised its projected capital spending for this year to $925 million-1 billion, excluding acquisitions, from previous levels of $825 million-950 million, "after claiming early in the year it would not increase its spending plans," said analysts at Jefferies & Co. Inc., New York.
"This is a positive sign for oil service investors, and it strongly supports our belief that last week's Anadarko news was company specific," they reported Thursday. They see "solid fundamentals" for the drilling industry, "including an underlying natural gas delivery problem in the US."
Filings for drilling permits in the 30 monitored states increased by 4.8% in July from June levels, adjusted for comparable numbers of filing days, said Angeline M. Sedita, vice-president of oil service equity research at Lehman Bros. Inc., New York. "This month's improvement was led by Michigan, New Mexico (up 44%) and Kansas (up 33%)," she reported Friday. "The steady climb in permitting activity in recent months suggests a continuing modest climb in the (US) rig count over the remainder of 2003."
Rig count data
The bulk of the decline this week was in US land drilling, down by 17 rotary rigs to 952 working. Offshore drilling decreased by 5 rigs to 102 in the Gulf of Mexico and 106 for the US overall. Inland waters operations were down by 1 rig to 16.
The number of rotary rigs working in Canada fell by 19 to 397 this week, still well above the 191 that were working during the same period in 2002.
Among the rigs working in the US, the number drilling for natural gas fell by 17 to 920, while oil drilling was down by 7 rigs to 149. There were 5 rigs unclassified.
"As expected, natural gas spot prices declined for the third week in a row" to "a new 2003 low" of $4.52/Mcf as of Aug. 4, said Ronald Barone, UBS Warburg LLC, New York, in a Thursday report.
Meanwhile, Baker Hughes officials reported that US directional and horizontal drilling this week increased by 1 rig each to 289 and 96, respectively.
Texas and Louisiana led this week's decline, down 6 rigs each to 469 and 152, respectively. Oklahoma's rig count fell by 5 to 135. New Mexico was down 2 rigs to 59 still working, while Alaska was down 1 to 7. Wyoming was unchanged, with 65 active rigs, and California increased by 1 unit to 23.
Offshore utilization
The number of mobile offshore rigs under contract in the Gulf of Mexico increased by 1 to 130 this week, while the number available for work declined by 1 to 173. That boosted the rig fleet utilization rate by 1 point to 75.1% in those waters, said officials Friday at ODS-Petrodata, Houston.
In European waters, the number of contracted rigs declined by 1 to 83 out of 100 available for work, resulting in 83% utilization. Worldwide, there was a net gain of 3 contracted rigs to 528 this week, out of a total 653 available, said ODS-Petrodata officials. The global utilization rate among mobile offshore rigs thereby increased by a half point to 80.9%, they said.
