Despite recent declines in rig utilization because of sharply lower natural gas prices, Schlumberger Reed-Hycalog’s annual rig census shows that U.S. drilling rig utilization has jumped this year to a 20-year high. High commodity prices over the past year have caused the activity level of the expanded fleet to push utilization to 93%, a level not seen since the early 1980s.

“This year’s utilization not only jumped to a 20-year high, but it is also well above the historical census average of 73%,” said John Deane, Schlumberger vice president of drilling technologies, who announced the results of the census at the annual meeting of the International Association of Drilling Contractors in New Orleans.

The U.S. fleet showed a net gain of 86 units for 2001, rising about 5% to 1,722 rigs. Last year’s count of 1,636 was the all-time low in the history of the rig census. Most rigs added to the fleet this year were assembled from component parts. “Despite the age of the rig fleet, as market conditions improved, rig owners were able to repair or assemble needed rigs fairly quickly,” Deane said.

Reed-Hycalog’s census results were computed using a 45-day period: May 5-June 18. “The 2001 census also measures rig activity, and this year’s working rig count showed another huge increase in activity, up 31% to 1,593 units,” he added. This is the largest number of active rigs counted since 1990. The active rig count from the Schlumberger Reed-Hycalog census is higher than published weekly rig counts because it is a cumulative count of all rigs active at any time during a defined 45-day period this past summer. As a consequence of the surge in activity during the past year, utilization rose to 93% in 2001 from 74% in 2000.

“Mergers and acquisitions in the drilling contracting industry have not let up, and have continued for more than a decade,” he noted. As rig owners merged, the number of contractors declined to 191, down 17 from last year. “There were almost 700 rig owners back in 1987 and we’re down to less than 200 now.” Large contractors (those with 20 or more rigs) continue to gain more control of the total rig fleet, now owning 62% of all U.S.-based rigs.

In a survey conducted in conjunction with the rig census, drilling contractors reported “crew availability” as their number one concern this year. “Although drilling contractors have enjoyed improved market conditions lately, the instability of the industry has left an acute shortage of qualified labor. With the need to put rigs back to work, not even improved rig rates can bring back the lost generation of experienced help,” said Deane. Every contractor responding to the survey reported higher rig rates this year, but still “rig rates” came in as the number two problem.

Dean said the census data and contractor survey indicate a “very optimistic outlook” with expectations that commodity prices “won’t dip too low.” He said 63% of rig owners anticipate expanding their fleets over the next five years. Those plans undoubtedly will have to change if gas prices remain below $2 for an extended period. Producers already have started to slow drilling and some have even started to curtail gas production.

Deane predicts that next year’s census will show a modest growth of around 3% in the number of available rigs, based primarily on the momentum of the past year. “Activity, however, will probably slow by 5% or so since those incredible gas prices have dissipated, causing utilization to drop to about 85%. Although this seems like a significant decline from this year’s level, it still shows remarkable strength compared to most of the past two decades. Recent economic events may add additional uncertainty over the next year, but the overall picture remains strong.”

The complete rig census can be found at: https://www.connect.slb.com/rig_census.

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