The oilpatch has gone high tech and demand for new and better products has never been higher, Raymond James & Associates Inc. analysts said last week.

Analysts J. Marshall Adkins and James Rollyson were in Houston earlier this month for the annual Offshore Technology Conference (OTC), and they offered their insight in the latest Stat of the Week. The week-long event drew more than 75,000 to Houston, well above the 46,000 average over the last 15 years.

“The industry is clearly in an up-cycle as demand for more and better equipment continues to surge,” wrote Adkins and Rollyson. “We gathered from hundreds of companies that the common theme was that ‘business was good and getting better.’ All in, the conference highlighted the fact that the industry is as bullish as ever and continues to increase investment.”

The improved application and evolution of oilfield technology that was showcased at the OTC is making a “real difference” for exploration and production (E&P) economics, said the analysts. “The most obvious example of this has been the emergence of the shale plays in North America over the past five years. Operators are now using technologies that were mostly developed offshore decades ago to improve U.S. land economics and unlock reservoirs that were previously uneconomic. These increases in efficiency through technological advances should keep oilfield activity booming for years to come, even if oil and gas prices retreat from current levels.”

According to the analysts:

The industry’s focus is “clearly fixated” on deepwater resources, the duo noted.

“The most evident example of this growing trend is the rapid buildout of the offshore drilling fleet, which began in 2004,” they said. “There are currently 200 floating rigs in the worldwide fleet, and over the next five years the industry is scheduled to deliver another 75+ rigs (or 40% growth). That is just based on what has been ordered so far. Our channel checks indicate that there are 20-30 that could be ordered in the next year with price tags pushing the $1 billion level per deepwater rig.”

The improved application and evolution of new technologies, mostly pioneered offshore, also are “changing the game” for onshore operators as well, wrote the duo.

“Emergence of the North American shale plays (i.e., Barnett, Bakken, Fayetteville and Haynesville) are great examples — the core drilling and stimulation technologies that have successfully unlocked this shale production have been around for decades. However, improved application and improvements of these technologies have completely changed the North American natural gas supply situation.”

Improved 3-D seismic resolution and modeling have allowed companies to visualize and optimize horizontal well plans, they said. “A decade ago very few companies were doing this in shale areas. Improved directional drilling technology provides for faster, straighter and more accurately drilled wells. On the completion side, application and improvements of technologies such as multi-stage (surgical) fracs, zonal isolation and multibore completions have driven economic thresholds to new lows. Combine more efficient frac jobs with additional time saving techniques — customers are maximizing production and reducing F&D [finding and development] costs at a time when oil and gas prices are surging.”

The evolution of these technologies “should keep drilling activity booming onshore, even if commodity prices fall significantly from current levels,” said the analysts. “They are also the basis behind our recently increased U.S. rig count forecast (despite our bearish outlook for U.S. natural gas prices over the next several years).”

©Copyright 2008Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.