Special Report: Modest US, Canada drilling pickup seen in second half

July 20, 2009
Drilling in the US and Canada could recover modestly in the last 6 months of 2009 if oil and gas prices stabilize or improve.

Drilling in the US and Canada could recover modestly in the last 6 months of 2009 if oil and gas prices stabilize or improve.

As oil prices tumbled from highs near $150/bbl in mid-2008, the rig count followed to 2009 lows. Rig activity has seemed to begin to stabilize and pick up again only in the last month.

What little strengthening the US rig count has been able to muster lately has been tied mainly to rigs drilling for oil, but oil price fluctuations have tested even that firmness in recent weeks.

Still, several onshore shale gas plays have shown strength through the drilling downturn.

Rig counts in the US and Canada have averaged about 37% lower in the first half of 2009 than they did in the first half of 2008.

Elsewhere in the world, comparing the same period shows declines of 10% in Africa, 7% in Europe, 5% in the Middle East, 4% in Asia-Pacific, and 2% in the Western Hemisphere outside the US and Canada. The international rig totals do not include figures for Iran, Iraq, Russia, or China onshore.

Here are highlights of OGJ’s midyear drilling forecast for 2009:

  • Operators will drill 36,788 wells in the US this year, down from an estimated 52,097 wells drilled in 2008.
  • All operators will drill 3,534 exploratory wells of all types, down from an estimated 5,474 estimated last year.
  • The Baker Hughes Inc. count of active US rotary rigs will average 1,235 rigs/week this year, down from 1,867 in 2008 and 1,768 in 2007.
  • Operators will drill 9,854 wells in western Canada, down from an estimated 16,290 in 2008.

US activity

US rig utilization in January through June year to year was down 38% onshore and 14% offshore, according to Baker Hughes Inc.

Areas of first half year to year increase were in shale gas plays that buoyed rig counts in North Louisiana, Pennsylvania, and Arkansas, and in conventional drilling in Kansas.

Many operators responded decisively to the drops in commodity prices. Continental Resources Inc., Enid, Okla., for example, had been running 32 operated rigs in October 2008 with plans to increase to 35 by the end of the year but instead trimmed to 7 rigs on Feb. 26, 2009.

Wyoming, state of busiest drilling in terms of numbers of wells due to the Powder River basin coalbed methane play, fell about the same percentage as the total US onshore.

Most of the Texas districts were down 30-58% on the year, drilling off Texas was cut in half, and Texas inland waters drilling almost ceased.

Oklahoma averaged 109 rigs/week in the first half of 2009 versus 203 in the first half of 2008, and Colorado slid to 59 from 114.

Baker Hughes shows a slight increase in Alaska, but state officials who follow rotary and coil tubing drilling say the year to year first half well count is down 44%.

At the end of 2008, they said, the North Slope had 2 coil and 9 rotary rigs drilling and Cook Inlet had five rotary rigs running. As June ended, however, North Slope work fell to 7 development drilling operations (3 coil and 4 rotary) and only two rigs were drilling in Cook Inlet.

Geothermal drilling eclipsed oil and gas activity in Nevada. Operators spudded only one oil well in the first half of 2009 compared with four in early 2008 and 3 in the second half. Geothermal work has been running about 60% exploratory and 40% development drilling.

OGJ’s Canadian forecast is based on a shrinking number of gas wells drilled, although drilling in British Columbia shale plays bucked that trend.

The 270-company Petroleum Services Association of Canada forecast on Apr. 30, that 10,000 wells will be drilled in Canada in 2009. The organization had previously forecast 2009 Canada drilling at 16,750 wells in November 2008 and 13,500 wells in January 2009.

Some 36% of the wells drilled in Saskatchewan in the first half of 2009 were horizontal wells, Saskatchewan Industry and Resources reported, and total first half drilling was at less than half the levels of the previous 3 years.

Drilling off Canada’s east coast remained at a low ebb in the first half of 2009.

EnCana Corp. was the primary driller in Alberta and British Columbia in 2008, although it drilled far fewer wells than it did in 2007, and Crescent Point Energy Trust was the busiest driller in Saskatchewan, said Nickles Daily Oil Bulletin.