The pace of growth in land rig day rates began to moderate in 1Q 2011. After averaging growth of 8.75% in 2010, the aggregated average U.S. land rig day rate across all regions and all horsepower classes rose only 3% in 1Q 2011, according to the latest issue of The Land Rig Newsletter’s Day Rate Report. Of course, signs of moderation in day rate increases cropped up in second half 2010, as respective jumps of 13% and 12% in Q1 and Q2 gave way to a 5% increase each in Q3 and Q4.
Another way to look at the slowdown in rate growth is from the perspective of the average day rate weighted to 600–750 hp rigs, which rose only 2%. The culprit? Declining growth in overall demand for rigs and gas-directed rigs in particular. But deceleration day rate growth to a quarterly increase of a 3%—or even 2%, for that matter—is hardly cause for panic, especially after rates in the first quarter of this year climbed to their highest level in more than two years.