The U.S. natural gas rig count slowly has begun to rebound after bottoming in June, but the increased exploration has been confined to a few key areas, according to data reviewed by energy analysts. Activity planned by the oilfield service operators in North America will be a key indicator in the coming year, they said.
The domestic oil and gas rig count officially bottomed during the week ending June 12 at 876 rigs, with 685 (78%) looking for gas, 183 oil-directed and eight for geothermal work, according to Baker Hughes Inc. (BHI). By the week ending Dec. 11, 1,161 rigs were at work, with 757 (65%) gas-directed, 393 (34%) oil-directed and 11 rigs (1%) geothermal.
“Of note is that this increase in activity has been isolated to a few key areas,” said the BHI team. Gas drilling rigs jumped by 16 for the week ending Dec. 11, and most of the new gas rigs now are limited primarily to the Haynesville and Marcellus shales, while oil rigs are targeting the Permian and Williston basins.
“Focus on the shale plays has driven the horizontal rig count higher, while vertical wells (conventional activity) has continued to decline,” according to BHI data. “Oil-directed drilling is driving both the horizontal rig count (Williston Basin) and the vertical rig count (Permian Basin).”
The analysts at Tudor, Pickering, Holt & Co. (TPH) noted that the weekly rig count for the week ended Dec. 18 indicated that 4Q2009 U.S. activity has risen 13-17% quarter/quarter, “depending on the source.” In the most recent report RigData showed a gain of 14 rigs, Smith Bits was up by two rigs and BHI indicated a gain of 38 rigs.
RigData’s gain of 14 rigs was “driven entirely by gas-directed activity,” TPH noted. By operator, the public exploration and production companies lifted the count by adding 18 rigs, while privately held producers dropped four rigs. According to the data, the Rockies region gained eight rigs and East Texas/North Louisiana jumped by five rigs. Among the public operators, TPH said EnCana Corp. reported the largest rig increase with four new rigs operating.
Oilfield services operator Schlumberger Ltd. (SLB) earlier this month issued a 4Q2009 update, and TPH analysts dug into the numbers to get an idea of what may be ahead. In its review, the TPH team said the bottom line is that “the worldwide economy is clearly improving…The question is how quickly hydrocarbon demand follows…”
Most of SLB’s international exploration and development is crude-related, the TPH team said. The company has “lots of moving parts, but we generally think SLB doesn’t ring the ‘North American market is getting tons better’ bell” until 1Q2010. “We aren’t relying on SLB to lead the pack on this type commentary; given the size of the ship they steer, conservatism is appropriate.”
The North American market is expected to provide around 17% of SLB’s revenue, noted TPH, and the analysts believe that the company “isn’t seeing meaningful improvements in terms of pricing yet. The environment is characterized as mixed, with pockets of strength/weakness spread throughout the market…
“SLB is grappling with head count/recovery decisions in terms of ‘playing for tomorrow’ regarding U.S. natgas. We believe improving activity levels suggest fixed-cost reductions are largely over, and that SLB is looking at its supply chain as a source of margin help for 2010. Anecdotes of frac [hydraulic fracture] market tightening are too scattered to rely on yet, but more rigs equals more wells equals more fracs…Stay tuned.”
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