NEW YORK The outlook for domestic drilling remains tepid, with little to spur short-term optimism, market sources told AMM.
"Its still declining, still softening. Im looking for something that will make the drilling activity turn around, and there is nothing. Right now theres no big thing that people can hang their hat on thats going to change that," a southern distributor source said.
His concern was particularly the declining number of horizontal wells as increasingly "shallow, small, inexpensive oil wells (are) being drilled."
Horizontal drill rigs totaled 1,099 in the latest count by Houston-based oilfield services firm Baker Hughes Inc., down one from a week earlier, while the number of vertical rigs increased by 11 to 443 in the same comparison. The number of drill rigs operating in the United States totaled 1,748, up two from the previous week but down 231 from 1,979 rigs a year earlier (amm.com, April 1).
The tepid rig count comes even as economic activity is generally said to be improving.
"Overall, the American economy seems to be kind of wanting to get active," the distributor source said, adding however that there is "so much capacity in oil, gas and steel that every increase in consumption is easy to fill."
An analyst agreed with the assessment on natural gas. "We see production continuing to rise this year," Justin Carlson, manager of energy analysis at Evergreen, Colo.-based Bentek Energy LLC, told AMM. Therefore, significant price spikes are unlikely, with Bentek Energy pegging the long-term price range for natural gas at between $3 and $5 per million British thermal units (mmBtu).
Market sources have said that prices above $6 per mmBtu are necessary for new drilling to "really" kick off (amm.com, March 28).