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Oil Service Contractors Predict More Ramp Ups Domestically
Drilling service contractors operating in the United States and Canada are beginning to see business in the Gulf of Mexico stabilize, and some are forecasting success beginning in the second quarter from several projects expected to ramp up offshore and in key U.S. basins.
Strong improvements in North American natural gas, international projects and its U.S. land well-servicing business helped Houston-based Nabors Industries post strong earnings in the fourth quarter. And the company, which owns and operates almost 600 land drilling and 950 land workover and well-servicing rigs worldwide, expects to achieve higher results from all of its businesses this year.
CEO Gene Isenberg noted that along with its U.S. onshore growth, Nabors' Alaskan and U.S. offshore businesses increased significantly last year over 2002 -- with better success also expected this year.
"The fourth quarter of 2003 showed a large increase over the same quarter of 2002, but more significantly, it represented a substantial sequential increase over the third quarter of 2003," said Isenberg. "The largest increases during the quarter came from our North American gas drilling and U.S. offshore operations, with Alaska also posting improved results."
Going forward, the company is projecting a "robust outlook to continue throughout the year with substantial increases expected from all of our businesses except Alaska," although he added that even that segment has increased in recent days.
"In our U.S. Lower 48 Land Drilling unit, we are seeing the early stages of an improved pricing environment in selected regions and horsepower classes," said Isenberg. "I expect that by sometime in the second half of 2004, the Baker Hughes U.S. land rig count will have increased by more than 75 rigs from its 2003 highs, with Nabors garnering a larger share as our traditional customers become more active and well complexity continues to increase which requires more sophisticated rigs."
He said Nabors' strength offshore in the Gulf of Mexico is attributed to several factors, including the deployment of three new deepwater platform rigs that will ramp up in the first half of this year. The Canadian unit also is progressing "in excess of our expectations," to "validate the timeliness" of the company's expansion.
"Our confidence emanates from concrete developments in our Canadian, International and U.S. Offshore businesses as well as certain regions of our U.S. Lower 48 Land Drilling market and elsewhere by the continuing strength in the fundamentals, particularly North American natural gas," Isenberg added.
Houston-based GlobalSantaFe's net income in the final quarter of 2003 was down mostly because of lower dayrates on deepwater assets in the North Sea and lower use from its West African rigs. However, the downturn for the contractor was partially offset by an increase in dayrates and utilization for its jackup rigs in the Gulf of Mexico.
CEO Jon Marshall said that it appears that worldwide, the jackup market appears to be stable-to-improving, "reflecting a tightening in the worldwide supply and demand balance. In particular, we are seeing positive indications in 2004 for our heavy duty harsh environment jackup rigs in the North Sea, which experienced difficult market conditions in 2003. We are also encouraged that our customers are moving ahead with deepwater projects in the Gulf of Mexico, Brazil and West Africa, which could lead to more balanced market conditions for our deepwater assets in 2004 and beyond.
U.S. focused Patterson-UTI Energy Inc., based in Snyder, TX, reported a total of 5,790 drilling days in January, or an average of 187 drilling rigs operating, including an average of 172 rigs in the United States and 15 rigs in Canada. Patterson provides onshore contract drilling services to producers in North America.
CEO Cloyce A. Talbott noted that while demand for rigs "remained relatively stable during the last half of 2003, average revenues and margin per drilling day continued to increase in the fourth quarter. Our average revenue per drilling day increased by $180 to $9,760 and our average margin per drilling day increased by $240 to $2,840 compared to the third quarter of 2003."
Talbott said that in the fourth quarter, Patterson had an average of 191 rigs operating, including 12 in Canada, compared with 192 in the previous quarter, including 11 in Canada. "We estimate that our rig count will average 186 rigs operating in January, including 15 in Canada. January activity levels were impacted by slow post-holiday start-ups and weather delays, but we are seeing a steady pickup at the end of January. Customer inquiries are increasing as 2004 drilling programs commence and we expect our rig count will continue to increase as the first quarter progresses."
Meanwhile, Houston-based Transocean Inc., considered the world's largest offshore oil and gas drilling contractor, saw its earnings down in the fourth quarter, and it expects "continued difficulty" in its international and U.S. floater contractor services in the near term. There are, however, "encouraging signs of improvement for this segment during the second half of the year and into 2005."
In North America, Transocean's Gulf of Mexico Shallow and Inland Water business segment experienced a 3% improvement in revenues sequentially from the third to the fourth quarter, as well as higher earnings year-over-year. It also expects to score this year as the dominant player in the industry's biggest growth area: deepwater drilling.
ENSCO International Inc. CEO Carl Thorne said that in the Gulf of Mexico, day rates for the jackup rigs are now stable, with "an improving trend" this year beginning in the second quarter.
"We continue our rig enhancement program with ENSCO 68 in a shipyard until the end of the third quarter of 2004, and with ENSCO 67 scheduled to enter a shipyard early in the second quarter for approximately nine months of work," said Thorne. "ENSCO 7500, our deepwater semisubmersible rig currently under contract in the Gulf of Mexico, is expected to complete its contract in early March. We are currently marketing the rig."
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