Nick Snow
Washington Correspondent
WASHINGTON, DC, Jan. 11 -- Total well completions in the US increased by 10% in the fourth quarter of 2005 from year-earlier levels, with oil and gas completions up 11% in each category, according to American Petroleum Institute. Gas wells outnumbered oil wells by about 2.5:1.
The report, which reported a 6% increase in dry holes, also showed a 13% year-to-year increase in development completions and a 14% decline in exploratory completions.
It said an estimated 11,099 oil wells, gas wells, and dry holes were completed during the period, compared with 10,052 in the 3 months ended Dec. 31, 2004. There were 6,955 gas well completions, 2,944 oil well completions, and 1,150 dry holes in 2005's fourth quarter.
Total estimated footage drilled grew 18% year-to-year to 64,979,000 ft in the 3-month period, according to API.
In 2005's fourth quarter, the US Energy Information Administration said, domestic wellhead gas prices averaged an estimated $10.17/Mcf. EIA's crude oil price estimates were not complete, but the agency indicated that US refiners' average acquisition costs, which are similar, were an estimated $54.34/bbl during that period.
"The drilling market is very robust. We see a sustained, basically good future, certainly in the near to intermediate term," said Brian T. Petty, senior vice-president for the International Association of Drilling Contractors in Washington, DC.
"We're not particularly concerned about the split between development and exploratory completions," he said. "All of our members' rigs are running flat out, and we're scrambling to train crews. It's a significant barrier to our ability to deploy, but we're working on it."
'More than 80%'
Mark S. Urness, who follows drilling contractors and service and supply companies for Calyon Securities (USA) Inc. in New York, said he was not surprised that more gas than oil wells continue to be drilled domestically.
"They still represent more than 80% of the completions," he said of gas wells. "A large percentage of them are for gas from deep shelf, coalbed methane, and other unconventional sources. To some extent, producers are calling it gas mining now."
He noted that warm weather in December made US gas prices drop by more than 30% but said, "As long as they stay above $7[/Mcf], activity should increase."
George Littell, a partner in Groppe, Long and Littell, Houston observed, "Prices can be more of a restraint than a motivation. What seems to be driving this activity more is drilling in the Rocky Mountains and, to a lesser extent, in Central and East Texas."
In the Rockies, he said, coalbed methane and tighter well spacing are stimulating gas drilling.
"Previously, 80-acre spacing was considered the optimum," he said. "Both the New Mexico and the Colorado oil and gas commissions have gone down to 40-acre spacing from existing pads. I'm not certain there will be too many reserve additions from simply doing this, but there should be some increase in the total recovery. All in all, it's a lot of wells."
Littell added, "Some people have told me that in the Barnett shale areas, where they started out with 40-acre spacing, gas stays economic at $6 and up. Several of my producing company clients are spending their time trying to figure out if there are any other shale plays comparable to the Barnett."
Littell expressed some concern that exploration completions are falling while development completions increase. "It's discouraging that so little of this activity has anything to do with exploration. No one is finding new formations domestically. They're simply exploring more intensely what they already have," he said.
But Urness said he doesn't find the trend surprising, "given the emphasis on unconventional resource activities in the Barnett shale and parts of Wyoming."
Contact Nick Snow at [email protected].
