July 20, 2010

The renewed focus on oil and liquids-rich plays is expected to continue through the summer as coal remains competitive with natural gas. The Land Rig Newsletter team expects the gas rig count to remain near current levels in the near term. Natural gas drilling has found support recently from hot weather, which is expected to continue over the next couple of weeks, according to NOAA forecasts. Turning to liquids, Bakken rigs could be poised to move higher.  Bakken permits shot up unexpectedly to a recent high in early July despite the short holiday week, according to The Land Rig Newsletter’s Unconventional Drilling Report.

The ascension of liquids-rich plays is truly impressive. Since early April, the number of active rigs in the Eagle Ford has soared 38% to 65. During the same period, the Bakken posted a 28% gain to 111 rigs.  Moreover, interest in liquids appears to be spreading to other plays.  In recent weeks, inquiries related to other liquids-rich opportunities, including the Niobrara has picked up.

Sure to draw more attention for the same reason is the Granite Wash play in the Texas Panhandle, courtesy of Linn Energy’s new monster well. Linn’s second operated horizontal well in the Stiles Ranch area of Wheeler County, the Black 50-1H well tested 27 MMcfd of gas and 3,190 b/d of condensate at 2,150 psi flowing surface pressure. Including estimated NGL recoveries and accounting for shrinkage, the well flowed about 60.2 MMcfed on 24-hour test. The Houston-based independent anticipates payout in as little as 2 months. Linn has assembled a large leasehold in the area and is looking at follow-up opportunities.

Meanwhile, the number of unconventional-play permits is likely to rebound above 400 by the next Unconventional Drilling Report (July 29) after plunging by 60 to 371 because of the July 4th holiday-shortened week.

July 13, 2010

The land rig market is getting just a little bit tighter. The updated Ready Rig metric featured in the latest issue of The Land Rig Newsletter’s Biweekly Report points to an increasing number of rigs that could readily be put to work. Almost all of this growth has occurred among rigs suited for drilling deeper than 5,000 ft, or the traditional count.

Overall there’s been an increase of 4.2% in the tally of Ready Rigs (those having drilled at least one oil or gas well in the previous four quarters). But the increase in Ready Rigs from end-1Q 2010 to end-2Q 2010 was 5.6% for the traditional count vs. <0.8% for the <5,000 ft rigs. The sizable gains in Ready Rig counts also occurred among the higher-horsepower fleets, save for the really big rigs. The increases break out as 0.7% for <500 hp rigs, 4.2% for 500-999 hp rigs, 6.6% for 1,000-1,499 hp rigs, and 7.9% for 1,500-1,999 rigs. Meanwhile, the biggest class of rigs, 2000+ hp, dropped by 0.8%. It suggests increasing market dominance by rigs focused on the shale plays.

July 7, 2010

A lot of newbuild land rigs are in the pipeline despite a persistent overall capacity surplus. Most are >1,000-1,500 hp, considered the ideal size rig for tackling the shale plays that dominate U.S. land drilling today.

According to a survey of data in RigData’s rig equipment database, The Land Rig Newsletter has been able to identify 85 newbuild land rigs under construction or planned. Of that total, 58 will have been built by yearend, and two are on tap for 2011. At least 25 of these newbuilds have passed their 2009 and 2010 availability dates and are still in the yard; 64 are under construction, and the rest are planned.

The horsepower breakout was 23 at 1,000 hp, 22 at 1,500 hp, 2 at 1,200, 1 each at 1,400 hp and 2,000 hp, 6 at 500-999 hp, and 3 at <500 hp. Seventeen of the rigs are being built in China, all of them 1,000 hp or 1,500 hp and all of them for the same major public driller.