U.S. DRILLING DUE SECOND-HALF REBOUND; CANADA'S BINGE COOLS

G. Alan Petzet
Exploration Editor

Robert J. Beck
Associate Managing Editor-Economics

U.S. drilling in the second half of 1995 will pick up from the low first-half level, pushing the total number of wells drilled during the year to about the level of 1994.

Drilling is easing in Canada from the binge of 1994, but it is still above 1992-93 levels. Here are highlights of OGJ's midyear U.S. drilling forecast for 1995 (43926 bytes):

Operators will drill 21,900 wells, compared with the 21,950 wells OGJ estimated in its early year forecast (OGJ, Jan. 30, p. 75).
The active rotary rig count will average 730, down about 5.8% from 1994.
Operators will drill about 3,182 wildcats and other exploratory wells during the year, including an estimated 1,572 they drilled during the first half.
A surveyed group of major operators will drill 2,817 wells during the year, including 211 exploratory wells.

Meanwhile, drilling in western Canada will total 9,743 wells, compared with 11,750 in 1994.

U.S. ESTIMATES

OGJ estimates that drilling and completion spending will total $9.855 billion in the U.S. this year, down 3% from spending in 1994.

Wellhead revenue is expected to total $66.3 billion for the year, 2.8% lower than in 1994. This amount would be generated by production of 6.55 million b/d of crude oil and lease condensate at an average price of $14.50/bbl and 19.79 tcf of gas at an average of $1.60/Mcf.

This spending level should result mi a 3.5% decline in well completions from an estimated 92,700 in 1994. Footage drilled is expected to drop 3.7% to 126,900 ft of hole this year. The figures also result in a likely average depth of 5,795 ft and drilling/completion costs of $450,000/well and $77.66/ft in the U.S., both slight increases from 1994.

U.S. ACTIVITY

OGJ calls for a measured rebound in activity in second-half 1995, but the pickup will be uneven across the country.

For instance, drilling permits issued in Texas through first-half 1995 are an aggregate of about 25% higher than in first-half 1994. Permits in individual Texas districts are as much as 40% higher. Royalty incentives have propelled drilling in the state.

Permits are up-although by small numbers-in North Dakota, where a Mississippian Lodgepole oil play is moving to the field, and South Dakota.

First-half permits are off in Colorado, Illinois, Kentucky, North Louisiana, North Arkansas, Kansas, Montana, northern New Mexico, Oklahoma, and Pennsylvania.

First-half drilling was weak in many areas of the U.S. The Baker Hughes weekly rig count averaged only 666 through June 30,13% lower than in first-half 1994.

Large numbers of wells are being drilled by portable air rigs not included in the Baker Hughes count. These rigs are widely used in Illinois, Michigan's heavily drilled Devonian Antrim shale gas play, and throughout the Appalachian region. These smaller, nonrotary rigs are being employed in burgeoning multiwell coalbed methane programs in Utah.

THE MAJORS' PLANS

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Major oil company responses to the Journal's biannual survey indicated these companies will drill slightly more wells in the second half than in the first half.

Exceptions to the slight increase are California, Texas, South Louisiana, and Kansas. Second-half increases are planned in the Gulf of Mexico off Louisiana, eastern New Mexico, and Wyoming. One major indicated plans for a wildcat in Arizona during the second half, but individual responses to the survey are confidential.

CANADIAN OUTLOOK

Drilling in Canada is likely to far exceed the average of recent years even with the forecast decline from 1994.

A pickup in heavy oil drilling will take up some of the slack from declining natural gas drilling.

The Journal's estimate of 9,743 wells is below the estimated 11,750 wells drilled in 1994 and a record 12,200 in 1985. It compares favorably with the 10 year average of 7,700 wells/year.

Various Canadian trade groups have predicted declines this year of 10-19% below the 1994 pace.

Slowdowns in gas drilling due to weak gas prices may be offset in part by heavy oil drilling programs such as one announced by Amoco Canada Petroleum Co. Ltd. in June. The company announced plans to drill 100 development wells at Primrose, Alta., by yearend 1996 and 27 horizontal wells at Wolf Lake, Alta. The drilling is part of a $100 million heavy oil development plan timed to take advantage of a temporary royalty agreement.