For the first time in more than 2 years, the overall rig count has topped 1,700 and oil futures prices have closed above $90/bbl. Yet natural gas prices are about two-thirds of their 2008 lows. Meanwhile, the gas rig count is about 54% of the total today vs. 80% in that same time span, and even gas shale rig counts have plateaued—with the glaring exception of the Marcellus. Why? Superior economics, for one. That is what is drawing a lot of M&A action to the play. Marcellus deals accounted for nearly half of US gas-focused transactions in 2010. That’s a strong endorsement of the play, given the bleak outlook for gas prices. More deals mean more drilling.


So, barring a plunge well below $3/Mcf, The Land Rig Newsletter team expects to see the Marcellus holding up in 2011 even as drilling to hold acreage winds down in other gas shales. Rig counts in oil and liquids-rich plays should continue trending higher.  However, the pace is likely to slow somewhat due to infrastructure bottlenecks and demand constraints.

Oil advanced after a Bloomberg report showed U.S. retailers had their best holiday sale in five years. Energy analysts expect crude oil to keep advancing. The president of Oil Outlooks & Opinions, LLC said, “We’re staying in the $90.00 area, with an eye on hitting $100.00 in the New Year. Demand is picking up and should rise further in coming months.” Crude oil for February delivery gained $0.49 to settle at $91.49 a barrel on the New York Mercantile Exchange.

Bureau of Ocean Energy Management, Regulation and Enforcement Director Michael R. Bromwich announced that Dr. James Kendall will serve as the Acting Director of the Alaska Outer Continental Shelf Region beginning January 1, 2011. The current Director of the Alaska Region, John Goll, is retiring effective December 31.

ShawCor, Ltd. announced its pipe coating division, Bredero Shaw, has received a $40 million contract to provide subsea insulation coatings for the Jack/St. Malo project, operated by Chevron North America Exploration and Production Company.

 

Dresser-Rand Group, Inc. has been awarded contracts to build compression and power generation equipment worth about $250 million for five major offshore projects. The projects involve a floating, production, storage and offloading vessel, a semisubmersible, a tension leg platform, and two fixed-leg platforms located in various fields in Southeast Asia and the Gulf of Mexico.

Semi Noble Clyde Boudreaux has secured a contract with Shell for the rig to mobilize to Brazil. While completed details are not yet known, it is understood work will begin in February 2011. The rig is currently hot stacked in the US Gulf of Mexico. It had been on a six-month standby period under its contract with Noble and was released on December 12 when the operator opted not to proceed with a new 17-month deal that would have kept the rig working to May 2012.

 

Jacking system repairs to jackup Seahawk 3000 were completed, and the rig has mobilized to location for Energy XXI (Bermuda), Ltd. in East Cameron Block 334 to begin the first of three contracts. Work is expected to last around 14 days, after which the rig goes to High Island Block A-309 for a 40-day program with Badger Oil Corporation. Upon completion of that work, the rig goes to Arena Energy, LP for a five-well, 120-day contract in East Cameron Block 328 that will keep the rig busy well into June 2011. Seahawk Drilling, Inc.’s other idle but committed jackup, the Seahawk 2001 is likely to remain on standby until sometime in January, as ...

Noble Corporation has entered into an agreement with Jurong Shipyard in Singapore for the construction of two high-specification, harsh-environment jackups. The contract also contains options for up to four additional units, which must be exercised by January 1, 2012. The price of each option is based on the original unit price, plus a potential escalation factor. If exercised, deliveries would take place in six-month increments beginning in late 2013. The new rigs, the Friede & Goldman JU3000N design, will cost around $220 million each and are scheduled for delivery in the fourth quarter of 2012 and second quarter of 2013. The new Noble rigs will be rated to drill to 30,000 ft in 400 ft of water. The cantilever reach will be 75 ft, with a hookload capacity of 2.5 million pounds.