August 31, 2010


The Marcellus might need fewer rigs than previously thought. At Enercom in Denver last week, Cabot Oil & Gas indicated that drilling on synthetic muds should lead to higher drilling efficiencies.  Consequently, the company believes it can work through its Marcellus program with fewer rigs. Pilot tests are expected to get underway this year.

Among other takeaways from Enercom reported in The Unconventional Drilling Report, Atlas is planning a 3 well exploratory program to kick off the new Collingwood shale play this year.  The wells will be drilled in three western counties of Michigan.  A rig was secured for the 3-well program; it has to be brought in from another area. The company didn't say, but a rig from the Marcellus region wouldn't be a total surprise, given the operator.

Also evident at Enercom were signs that the Montana Bakken is clearly gaining attention.  Brigham Exploration is active in Richland County.  One interesting nugget:  It appears the rock is harder in western areas of the Bakken.  

August 17, 2010


Enthusiasm for oil and liquids-rich opportunities in the unconventional plays has been more than sufficient to offset a decline in drilling for unconventional natural gas, according to The Unconventional Drilling Report.

For the week ended August 6, the number of unconventional oil rigs increased by 25 while the number of gas rigs fell by 16, resulting in a slight uptick in the total rigs drilling for unconventional resources. 

In recent months, the Bakken and Eagle Ford have been heavy lifters in the shift to liquids.  However, these two plays are nearing a plateau.  Infrastructure constraints and more modest economic growth are likely to limit the pace of rig additions in the coming quarters. Limited takeaway capacity in the Bakken could begin to pinch drilling later this year. In the Eagle Ford, a potential flood of NGLs could prove too much for existing infrastructure. Margins for ethane and propane turned lower recently, suggesting supplies are already exceeding demand levels.

August 10, 2010


The continuing surge in day rates confirms a drilling industry that has moved beyond recovery into a growth mode, according to the 2Q 2010 Day Rate Report. Rig rates calculated as a straight average for all rig classes in all regions across the U.S. posted a double-digit increase for the second consecutive quarter in 2Q 2010, at 12% nearly matching the 1Q 2010 gain of 11%.

It’s been a remarkable turnaround for a metric that was still trending slightly down as recently as 4Q 2009, finding bottom at yearend. The comparison changes markedly when comparing day rates weighted to the average horsepower of the U.S. land fleet, historically pegged at 600-750 hp. Using that methodology, the 2Q gain for the U.S. fleet was only 6% vs. a 10% jump in 1Q 2010.

But taking a closer look at the rate breakdown by rig class helps illustrate how the 600-750 hp class is “bringing down the curve.” The smaller rig class posted an increase of only 6% compared with a 13% jump for 1,500 hp rigs. 

August 3, 2010


Late July rigs counts across all the major unconventional plays climbed 2.5% to 770 units, according to The Land Rig Newsletter’s Unconventional Drilling Report. The higher count was driven by healthy gains in the Eagle Ford and Pennsylvania Marcellus, with each play seeing an increase of 11 units.

Overall, utilization remained flat at 83%. Could the once mighty Haynesville, the play with a voracious appetite for big rigs, be content with fewer than 200 rigs? In recent weeks, the answer is a resounding yes. In fact, the count has hovered around 180 units since June. This level makes sense, given drilling needs for leasehold retention and relatively low gas prices. Unconventional permit counts surged to almost 500 the week ended July 23, well above expectations. The Piceance saw the greatest increase, as applications grew 172%.

However, refilings accounted for almost half of the increase. Elsewhere, strong interest in liquids led to higher filings in Montague County (Barnett) and sustained activity in the Eagle Ford and Bakken plays.