North American exploration and production spending in 2003 will be more focused, shifting mostly toward Canadian and deep-shelf Gulf of Mexico (GOM) natural gas plays where there are “significant” opportunities to replenish U.S. gas supplies, according to a report by RBC Capital Markets analysts.

Overall, offshore rig markets appear to be fairly stable, with the GOM jackup market experiencing some “modest” pricing pressure — except for deep-gas wells. However, said analysts, “Mexico will most likely increase its offshore rig count from 22 to 40 over the next 12-18 months, reducing some excess in the Gulf of Mexico.”

Even though there are 92 jackups under contract in the GOM, analysts said that the count has remained flat for three weeks. “At this time, we do not believe there is anecdotal evidence of a sustainable improvement. The most likely scenario is an upturn in early 2003.” Premium jackups, however, are achieving near full-utilization, said RBC, “likely due to the incremental demand for jackups capable of drilling efficiently in the deep shelf (15,000 feet or greater)”.

Deep-shelf wells, said analysts, yield approximately three times the daily production and 10 times-plus the reserve base of wells drilled in less than 15,000 feet. “As such, we believe that a limited number of jackups capable of drilling efficiently in the deep shelf will continue to command premium dayrates. Based on our conversations, the premium seems to be in the $5,000 range.”

Price-wise, 250-foot jackups are flat to slightly down from previous levels, to between $22,000 to $25,000. For 300-foot rigs, the price is in the $27,000 to $32,000 range, down from the mid-$30,000, while 350 foot-plus rigs are priced in the mid-$30,000 from the former $40,000. The shallow deepwater, between 1,000-3,000 feet, “remains weak,” said RBC analysts. “We do not see this market recovering until mid-to-late 2003.” They noted that “opportunities are primarily short-term, and therefore, pricing remains soft.”

Meanwhile, in Mexico, RBC analysts noted that Pemex, the state-owned oil and gas company, is rumored to be tendering for another 15 to 18 rigs next year. The bid package, they said, is expected in February, with start dates ranging from June through September 2003. Seven are expected to be floaters: with four at 600 feet, one at 800 feet, one at 1,700 feet and another at 3,000 feet. “Although timing and magnitude of the actual awards is uncertain, any floaters pulled from the Gulf of Mexico will be a positive. Having drawn approximately 22 rigs out of the Gulf of Mexico in 2002, Pemex should continue to ramp up activity in order to increase Mexico’s productive capacity.”

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.