Drilling activity continues winding down

By OGJ editors
HOUSTON, May 8 -- US drilling activity continued to fall away, down by 17 units to 928 rotary rigs working this week, compared with 1,846 in the same period last year, said Baker Hughes Inc.

Canada's rig count declined by 4 to 63, down from 122 rotary rigs working a year ago.

Land operations accounted for all of the US decline, down 21 rigs with 868 working this week. Inland-water activity increased by 2 to 7 rigs. Offshore drilling was up 2 rigs to 52 in the Gulf of Mexico, out of a total 53 rigs in US waters.

Of the US rigs working, 730 were drilling for natural gas, 11 fewer than the previous week. There were 190 rigs drilling for oil, down by 6. There were 8 rigs unclassified. Both horizontal and directional drilling were down by 5 rigs each to respective counts of 380 and 164.

In recent conference calls to analysts, several producers have predicted the US gas rig count will drop to 650. But some say such a low number would be a more effective driver "than price itself" to put more rigs to work in January-February. "And it would take 3 months to get production to trend up," said analysts at Pritchard Capital Partners LLC, New Orleans. The first falloff in gas production will probably occur this month, "but those numbers are not released until August," Pritchard Capital said.

James C. West at Barclays Capital Inc. in New York reported, "US and Canadian land drilling and workover activity as well as shallow-water drilling are likely to be under significant pressure through mid-2010, in our view. Day rates for rigs servicing these markets will likely be down sharply."

West said, "We expect a prolonged downturn in the North American natural gas market along with significant overcapacity in both the land drilling and pressure pumping businesses." However, he said, "The emergence of highly efficient shale plays in North America has reduced the rig count level needed to balance the market."

Texas had the biggest drop among major producing states, down 20 rigs to 355 working. Oklahoma's rig count declined by 4 to 84, and Colorado lost 2 to 43. North Dakota dipped by 1 rig to 36. Arkansas and New Mexico were unchanged, with respective counts of 48 and 34. Rig counts in Wyoming and Alaska increased by 1 each to 35 and 5, respectively. Louisiana was up 3 to 138, and California gained 4 to 21. In other states of interest, Pennsylvania and West Virginia each increased by 1 rig to 28 and 23, respectively. Utah was down 1 to 14.