61 st Annual RIG CENSUS

Transcription

1 61 st Annual RIG CENSUS A Special Section of Published in November 2014

2 Global rig fleet grows, both onshore and offshore North American rig fleets expand, and more rigs are put to work, while the global, offshore mobile fleet continues to make gains with new units. BRANDON MONTAGNE and TORY STOKES, NOV Downhole United States rig owners continued adding to their fleets in 2014 and were able to put more rigs to work. According to the 61st Annual NOV Rig Census, the U.S. available fleet made a significant jump over the past year, and activity levels seemed to support this increase. When rig counts were tallied for the census in the early summer of 2014, commodity prices were strong enough to fuel additional drilling momentum. The gap between available and active rigs shrank, and showed an overall strengthening in the U.S. market. The Canadian drilling environment also showed growth in availability, as newbuilds and reactivations were added to the fleet. Canada experienced a turnaround in activity levels, regaining most of the losses seen over the past two years. Worldwide statistics were also encouraging for The global offshore mobile fleet continued to make notable gains in the number of available rigs added to the fleet. Again this year, a large number of newly manufactured units came online, with most having standing contracts to drill. Activity levels rose, as well, and kept pace with available units, causing utilization for the offshore mobile fleet to be relatively unchanged. With the exception of Asia (including China), international utilization of rigs rose in most primary areas. CENSUS HIGHLIGHTS Key statistics from the 2014 census include the following: The U.S. fleet had an overall increase of 199 rigs, pushing the total available count up about 7% to 3,254. This net increase is the result of 387 rig additions and 188 rig deletions, Fig. 1. The number of U.S. rigs counted as newly manufactured rose in 2014, totaling 187 units. The number of rigs that were retired or removed from service this year was 177, a slight decrease. U.S. rigs meeting the census definition of active rose to 2,269, up about 10%. Utilization of the U.S. fleet (combined land and offshore) grew three percentage points and now stands at 70%, Fig. 2. There were 319 U.S. rig owners counted in 2014, compared with 313 last year. Fig. 1. U.S. available vs. active rigs, Available 5 Number of rigs, thousands Note: 2002 data are estimates Active Drilling contractors own 85% of all U.S. drilling rigs, a one percentage point decrease this year, with operators owning the remaining 15%. The Canadian available rig fleet rose to 796 units, up 2% from last year. Canadian rig activity jumped 22%, with active units numbering 352 in Utilization for Canada rebounded to 44%, compared with 37% last year. The global offshore mobile fleet s available count grew 5% this year, coming in at 890 units. The active count for the global offshore mobile fleet grew 4%, and reached 725. Utilization of the global offshore mobile fleet is now 81%, just slightly lower than 2013 s level. All international regions, with the exception of Asia (including China), showed increases in rig utilization over the past year. Every U.S. region had increases in available rigs, with the exception of the Gulf Coast, which was essentially flat. Drilling contractors own 85% of the 2014 fleet, while operators own 15% Fig. 2. U.S. available rigs vs. utilization, Number of rigs, thousands Utilization rate Available rigs Note: 2002 data are estimates % 3, ,254 2, Utilization rate, % 2 NOVEMBER 2014 / WorldOil.com

3 Table 1. Changes in the available U.S. fleet Previous year s fleet 3,055 3,006 3,081 3,153 3,169 3,076 2,817 2,298 2,026 1,988 1,719 1,722 1,722 1,636 1,644 1,705 1,665 Reductions to fleet Removed from service n/a Moved out of the country n/a Destroyed n/a Subtotal, deletions n/a Additions to fleet Newly manufactured n/a Brought back into service n/a Moved into the country n/a Assembled from parts n/a Newly identified* 95 Subtotal, additions Net change n/a Total available rigs 3,254 3,055 3,006 3,081 3,153 3,169 3,076 2,817 2,298 2,026 1,893 1,719 n/a 1,722 1,636 1,644 1,705 *2004 adjustment made in conjuction with RigData U.S. ATTRITION DROPS Every year, some rigs are considered unavailable, based on census rules, and are retired from the U.S. fleet. Older rigs with outdated equipment and technology, which have been sitting idle for three or more years, are no longer considered available. Units that need a significant capital expenditure, or a considerable time investment, are also not counted in the census. Accidents that damage rigs beyond repair also put rigs out of commission. When units are transferred to other countries for more profitable ventures, these rigs are taken out of the U.S. census and counted in other international tallies. Each of these cases is counted as a reduction to the U.S. fleet. Total deletions this year numbered 188 rigs, a 9% drop since last year s 207-unit decline. This was the lowest number of rig deletions since 2008, Table 1. The largest number of rigs deleted continues to be in the Removed from Service category. This has remained stable over the past year, with a net drop of just five units, to 177. This is quite a different story from the reduction seen in 2013, when the number declined by about 50%. This category includes any units that require a large capital expenditure, rigs auctioned for parts or cannibalized to keep other rigs running, or units that have been stacked for three or more years. Note that some of these rigs may re-enter the census at a later date, if drilling conditions warrant, but have to be disqualified presently, to ensure an accurate representation of the current available fleet. If any of these rigs are re-introduced to the fleet, they are typically categorized under the Brought Back Into Service portion of the census, in the Additions part of this article. There is always a need for some units to be refurbished or reactivated, if economic conditions improve. Depending on worldwide market conditions, companies move their rigs into, and out of, the U.S., and we attempt to follow these rig movements on a year-to-year basis. In this year s count, just six rigs moved out of the U.S., quite a few less than the 22 units that were exported in These units are classified in the Moved out of the Country category. Rig movement into the U.S. is covered in the section below. Rig accidents, where equipment was damaged beyond repair, Fig. 3. U.S. change in available rigs, Change in available rigs Note: 2002 data point is an estimate put some units in the final deletions category as Destroyed. Five rigs were reported to have sustained significant harm in the 2014 census and were classified in this category. Specific information was not provided for all of them, but at least two rigs were known to have burned, due to blowouts. This compares to three rigs that were counted as destroyed in the 2013 census. U.S. RIG ADDITIONS SWELL After rig building slowed in 2013, rig expansion programs accelerated in 2014, producing a significant number of new units. Refurbishments were also extremely prolific this year. As market conditions have improved, reactivations have been a cost-effective way to bring units online quickly. Several rigs were also brought into the U.S. from other countries. Census figures show that 387 rigs were added to the fleet over the last year, up 51% from the previous year. These additions considerably outnumbered the 188 deletions to the fleet, Table 1. United States newbuilds rose in 2014 after having experienced a downturn in There still appear to be a plentiful supply of innovative rigs being produced, bringing down the average fleet age. Over the past decade, 1,927 brand-new units have been introduced into the U.S. fleet, indicating that more than 60% are performing at a higher level of cost and efficiency. Of those new units, 187 were added during this year s census, compared with 147 added in World Oil / NOVEMBER

4 Table 2. Changes to the Canadian rig fleet Previous year s fleet n/a Reductions to fleet Removed from service n/a Moved out of the country n/a Destroyed n/a Subtotal, deletions n/a Additions to fleet Newly manufactured n/a Brought back into service n/a Moved into the country n/a Assembled from parts n/a Subtotal, additions n/a Net change n/a Total available rigs Total active rigs Utilization 44% 37% 44% 48% 42% 22% 46% 43% 84% 74% 66% 69% 54% The number of U.S. rigs that were Brought Back into Service spiked in This year s number came in at 193, more than double the 97 units reactivated in Each of the rigs that were reintroduced had been counted previously in a prior census, but had been out of commission. Many of these 193 reactivations have been refurbished and are being counted again as part of the U.S. available fleet. Six rigs that Moved into the Country during the past year are also counted in the census. This is down from the nine rigs that moved into the U.S. during With six units moving in and six moving out, the net import/export count was stable. In recent years, more rigs typically have moved out of the U.S. than moved in, so it s noteworthy that this was not the case in Differences in rig movements are often minor, so it can be difficult to tell when trends are reversing. However, strict U.S. drilling regulations have been burdensome, and rig owners have been drawn, justifiably, to other markets for many years. Lastly, just one rig Assembled from Parts was added to the fleet in Although there are probably more units that could be classified in this category, it is becoming increasingly difficult to quantify, based on the data that are gathered. It also can be hard to differentiate between refurbishments and new assemblies, especially when rigs have changed ownership and are renamed. For these reasons, beginning in 2015, the Assembled from Parts category will be absorbed into the Brought Back into Service category. Total rig additions numbered 387, while deletions totaled 188 units. The net change in the fleet over the past year was a 199-unit gain, up about 7%. This is compared with a fleet increase of just 2% in 2013, Fig. 3. CANADIAN FLEET REBOUNDS The Canadian available fleet has made another significant gain in rigs during This is the second year of increase after several years of declining counts. Rigs retired from service matched fairly closely in number to those reactivated, but newly manufactured rigs helped gains overcome losses to achieve a further increase. Rigs Removed from Service continues to be the primary cause of Canadian fleet attrition. This includes rigs idle for greater than three years, or those requiring a large capital outlay. Data gathered about these units indicated that 38 fell into this category and were, therefore, dropped from the census available count. This is less than the 52 rigs removed in Eleven rigs also were taken out of the census in 2014, due to being Moved out of the Country. This was a noteworthy decline, compared with the 21 rigs that were relocated last year. Most of these rigs were headed to the U.S. market, but several were bound for Latin America. No Canadian units were reported as Destroyed over the past year. The sum of all deletions totaled 49 units in The number of Newly Manufactured rigs entering the Canadian fleet has declined this year after a resurgence in For 2014, the number of brand-new rigs totaled 24. This was a decrease from the 64 units that were built from scratch in Rigs Brought Back into Service have been stable for the past five years, with 32 being the number reactivated for Rigs Moved into the Country for Canada doubled over the past year, as 12 were counted as being imported. This makes a net addition of one rig, when looking at the import/ export balance. No units were indicated as Assembled from Parts. Total rig additions came to 68 units, overall, for Canada. Although this was 35 units less than the previous year, additions still outnumbered deletions, causing the available count to rise by 2% or 796 rigs, Table 2. GLOBAL OFFSHORE MOBILE FLEET EXPANDS Rig-building accelerated in the offshore sector this year and was the dominant reason that units were added to the fleet. Overall attrition was slightly higher than last year, but did little to offset the gains, due to the newly manufactured units. Reductions to the fleet this year included 22 rigs that were Removed from Service, some of which are undergoing conversions to non-drilling. This compares to 17 rigs that were retired in the previous census. Three offshore units were reported as Destroyed, due to accidents, Table 3. If an offshore rig has not worked for more than five years, and does not have upcoming contracts, it is removed from the census until this status changes. This is to prevent rigs, which cannot be reactivated quickly, from being counted as available. Although the census is able to track the majority of platform and inland barge rigs in the U.S., the global mobile offshore 4 NOVEMBER 2014 / WorldOil.com

5 Table 3. Changes to the global offshore mobile fleet Previous year s fleet n/a Reductions to fleet Removed from service n/a Destroyed n/a Subtotal deletions n/a Additions to fleet Newly manufactured n/a Brought back into service n/a Assembled from parts n/a Subtotal additions n/a Net Change n/a Total Available Rigs Total Active Rigs Utilization 81% 82% 76% 70% 77% 81% 88% 88% 85% 85% 72% 71% 68% 73% Fig Global offshore mobile fleet, by region. Fig. 5. Makeup of the Global Offshore Mobile Fleet. Indian Ocean 6% Far East 5% Other* 4% Med/Black Sea 3% Middle East 17% Submersibles* 2 rigs 0 active 0% util. Drill barges 24 rigs 19 active 79% util. Semisubmersibles 214 rigs 167 active 78% util. Tenders 38 rigs 23 active 61% util. Jackups 506 rigs 421 active 83% util. Drillships 106 rigs 95 active 90% util. Mexico 7% SE Asia 14% West Africa 10% NW Europe 11% South America 11% *Total of regions with less than 2%, each, including: Australia/New Zealand, Baltic, Canada, Caspian, Central America and Russian Arctic. U.S. - GOM, Pacific, Alaska 12% statistics do not reflect these units, since worldwide statistics are particularly hard to obtain. Another 63 brand-new rigs came online and entered the census for the first time. The rate of increase in the fleet has been especially noteworthy for the past six years, with 40 or more rigs added each year. Another 81 units are scheduled for worldwide delivery by the middle of 2015, according to IHS. Even though all of these rigs will not meet that schedule, another prolific year of fleet additions is likely, possibly surpassing the number of new units reported in the 2014 census. In addition to these newbuilds, two offshore rigs also were Brought Back into Service. No units were added after being Assembled from Parts. The available count for the global offshore mobile fleet now stands at 890 units, a net increase of 40 rigs, and a 5% increase from last year. The worldwide offshore mobile fleet is widely distributed, with the Middle East in the lead, followed by Southeast Asia, and the U.S., Fig. 4. Fleet composition by specific rig type is shown in Fig. 5. *Arctic rigs are included with submersibles. This does not include platform and inland barge rigs. Total fleet = 890 Active rigs = 725 Utilization = 81% U.S. ACTIVITY SURGES After showing a lagging year in 2013, U.S. drilling activity picked up considerably this year, numbering 2,269 for 2014, versus 2,055 last year. This resulted in a jump of about 10%, and a rebound to the 2012 level. Active rigs rose to a greater extent than available rigs this year, shrinking the gap between the two and indicating stronger market conditions. The methodology used to count active rigs for the NOV census is different from other published rig counts. This census counts a rig as active, if it has turned to the right at any time during a defined 45-day period in the late spring, this year between May 9 and June 22. Other active counts typically report shorter windows of time, such as a week. When a longer period is used to monitor activity, a larger pool of working rigs will be counted, and the count will be higher. This is a better indication of activity, since fewer active rigs will be left out of the count, due to relocations. Rig utilization, the ratio of active to available rigs, is a statistic that gives an indication of the demand/supply balance. Gains in utilization can show increasing economic strength in the industry. This year, U.S. utilization has improved and is now 70%, rising three percentage points since Although this year s utilization is still below the historical average of 74%, it has reached the 70% mark, which typically indicates a healthier drilling market. World Oil / NOVEMBER

6 CENSUS GROUND RULES Company sales regions were used for the geographical breakdown shown in Table 4. Contractor-owned rigs are those belonging to companies whose primary business is offering drilling contracting services. To be considered active, a rig must be drilling at least one day during the 45-day qualification period. Only workable rotary rigs are included; cable tool rigs are excluded. To be considered available, a rig must be able to go to work without requiring a significant capital expenditure. Rotary land rigs stacked for an extended period of time, typically three years or longer, are not counted as available. A rig must be capable of, and normally employed for, drilling deeper than 3,000 ft. Therefore, some shallow drilling rigs are excluded, but this is necessary to ensure well-servicing rigs are not counted. Electric rigs include all those that transmit power from prime movers to electrically driven equipment. Inland barges include barge-mounted rigs that may be moved from one location to another via canal, bayou or river, and drill in sheltered inland waters. Offshore rigs include stationary platform units (both self-contained and tender-supported), bottom-supported mobile units, and floating rigs (both drill ships and semi-submersibles). Table 4. U.S. regional census results. Ownership Power source Rig type Bottom Total Region Year Available Active Utilization Driller Operator Mechanical SCR/Electric Land Barge Floating Platform Supported Offshore Alaska % % Northern % Rockies % Southern % Rockies % Northeast % states % Permian % basin % Gulf Coast % % ArkLaTex % % California % % Southeast % states % Mid % Continent % Total ,254 2,269 70% 2, ,440 1,814 3, ,055 2,055 67% 2, ,454 1,601 2, There were 985 available U.S. rigs that were inactive during this year s 45-day census period. These units may have been idle as they waited for contracts or were being moved to their next drilling location. These viable, but inactive rigs, were classified according to the length of time that they have been idle. Rigs stacked less than one year numbered 529; one to two years, 338; and two to three years, 118. If land rigs are stacked longer than three years, census rules state that they should be removed from the available count. Assuming no changes occur in their status over the coming year, most of the 78 rigs stacked for more than two years will leave the census in Often, idle rigs are retired for other reasons before their stacked status targets them for deletion. Rigs that require a large capital expenditure to be up and running are removed from the fleet, and fall into the category Removed from Service. Full-year utilization is another statistic used to measure overall fleet dynamics. This percentage is the ratio of active to available rigs that drilled at any time during the past year. Adding the 2,269 active rigs, to the 529 rigs stacked less than one year, provides the total number of rigs that drilled between the end of the 2013 census and the end of the 2014 census. This full-year utilization figure indicates that rig owners used 2,798 units, or 86% of all available rigs this year. This compares with 91% during the past census period. So, although utilization increased during the census active period, full-year utilization shows a decline. This indicates that the rig activity upswing was a relatively recent occurrence. Regional results are also computed for the census and often show variations based on area market conditions. Every U.S. region had increases in available rigs for 2014, with the exception of the Gulf Coast, which only declined by one rig. Seven out of 10 regions experienced increases in rig activity. The regional breakdown, which compares this year s numbers to 2013, is shown in Table 4. The regions with the greatest percentage increases in activity were the Northeast states, up 31%; the Permian basin, up 29%; and the Southeast states, up 22%. It is believed that the Permian basin region, in particular, experienced a bump in activity, due to increased horizontal drilling. California was the area showing the greatest decline in activity, down 15%. Utilization, by region, also shows mixed results, with six out of 10 regions having increases. The regional figures just mentioned are a combination of land and offshore statistics. Looking only at U.S. land rigs, however, we also see a modest increase in utilization. For 6 NOVEMBER 2014 / WorldOil.com

7 2014, land rig utilization was up to 70%, versus 68% in The U.S. marine fleet made a significant utilization gain in 2014, rising another seven percentage points to 69%. Rigs in greatest demand were inland barge rigs at 78% utilization, and floating rigs at 77%. Analyzing the U.S. land and offshore rigs by depth capacity, differences are visible between units in various ranges. The rigs with the highest utilization, 78%, continue to be those in the 16,000-to-19,999- ft range. Those with the lowest were the most shallow (3,000 to 5,999 ft), with a utilization of 57%, Table 5. CANADIAN ACTIVITY RISES SHARPLY Canada experienced a noteworthy increase in rig activity over the past year. Since the census is taken every year in the late spring and early summer, the timing of the spring thaw, and the ensuing road restrictions put in place to avoid environmental damage, often cause big differences in year-to-year active count statistics. For 2014, the active count surged, as total units drilling numbered 352 during the 45-day active window. This was a 22% increase from the same time in Utilization was pushed up this year, because active rigs rose at an even greater rate than available rigs. Canadian utilization measured 44%, versus 37% the previous year, Fig. 6. Subdividing the fleet, more than 60% of available rigs in Canada have drilling capacities between 6,000 and 12,999 ft. However, utilization by depth capacity shows that demand is now greatest for units in the 13,000-to- 15,999-ft range, where the demand-andsupply ratio comes in at 63%. We have been told that some of the major players are transitioning to deeper rigs, as drilling focuses more on the long-reach horizontal market. INTERNATIONAL RIG UTILIZATION INCREASES NOV personnel are asked each year to examine rig counts on a country-by-country basis and then calculate international rig utilization for the primary areas. Accuracy in counting rigs can vary greatly, depending by country, but best-guess estimates are still included in the averages. For 2014, all areas, with the exception of Asia (including China), show increases in utilization. Many of the increases since 2013 can be attributed to improved data sources and record-keeping, as NOV attempts to better understand the international market. Table 5. U.S. rig utilization by depth capacity. Depth rating, ft Over 16,000 to 13,000 to 10,000 to 6,000 to 3,000 to By region Status 20,000 19,999 15,999 12,999 9,999 5,999 Total Alaska Available Active Idle Utilization, % 67% 50% 38% 100% 0% 62% Northern Available Rockies Active Idle Utilization, % 75% 68% 58% 53% 43% 50% 66% Southern Available Rockies Active Idle Utilization, % 77% 74% 77% 56% 74% 55% 69% Northeast Available States Active Idle Utilization, % 60% 94% 81% 48% 43% 42% 61% Permian Available Basin Active Idle Utilization, % 86% 91% 72% 69% 74% 67% 77% Gulf Coast Available Active Idle Utilization, % 75% 73% 68% 66% 70% 63% 72% ArkLaTex Available Active Idle Utilization, % 46% 88% 87% 67% 71% 62% 74% California Available Active Idle Utilization, % 44% 63% 8% 41% 63% 68% 51% Southeast Available States Active Idle Utilization, % 69% 100% 78% 52% 46% 50% 69% Mid- Available Continent Active Idle Utilization, % 70% 68% 86% 63% 57% 60% 69% By rig type Inland Available Barge Active Idle Utilization, % 80% 100% 78% 75% 50% 100% 78% Floating Available Active Idle Utilization, % 77% 100% 77% Land Available ,062 Active ,136 Idle Utilization, % 74% 78% 73% 62% 63% 57% 70% Offshore Available Platform Active Idle Utilization, % 64% 67% 80% 33% 33% 0% 60% Bottom Available Supported Active Idle Utilization, % 65% 100% 33% 0% 60% Total Available ,254 Active ,269 Idle Utilization, % 74% 78% 73% 62% 63% 57% 70% The latest counts in the FSU countries of Kazakhstan, Uzbekistan, Azerbaijan and Turkmenistan brought utilization figures up for Europe (including the FSU). Asia (including China), is especially difficult to get a handle on, due to secrecy in the Chinese oil field, but our focus on this area facilitated greater accuracy in determining the active-versus-idle count. Middle Eastern rig counts were up significantly, as Saudi Arabia required more rigs to maintain its oil production levels. World Oil / NOVEMBER

8 Table 6. International land rig utilization Europe, incl. FSU 96% 97% 90% 78% 86% 80% 94% 75% 96% Africa 99% 86% 85% 70% 77% 83% 96% 83% 87% Middle East 88% 94% 94% 82% 90% 97% 100% 94% 100% Asia, incl. China 97% 95% 96% 93% 96% 96% 96% 96% 86% Latin America 92% 90% 90% 81% 74% 93% 88% 80% 84% Overall 95% 94% 92% 84% 88% 90% 95% 85% 91% Fig. 6. Canadian available vs. active rigs, Number of rigs 1, Available Active Fig. 7. Global offshore mobile available vs. active rigs, Number of rigs 1, Available In Latin America, overall utilization was up, although it was due primarily to available rigs being down, instead of overall activity being lower. Venezuela was the country with the greatest increase in active rigs, due to the growth of proven reserves in the Orinoco Belt. Mexico had somewhat of a utilization increase, but overall rig counts were actually down, due primarily to PEMEX budget issues. In Brazil, Petrobras drilling activities were negatively influenced by economic and political issues, which did cause activity to decline, although rig utilization rose. Colombia saw rig activity decrease, as well, due to community issues and strikes in oil states. Worldwide, it is known that some areas have large numbers of available rigs, but these units are often saddled with older technology and may not be universally mobile or marketable. Also, in some cases, available rigs are actually under contract awaiting a project start, and are, therefore, unavailable for other work, Table 6. MOBILE FLEET CONTINUES ITS ASCENT The global offshore mobile fleet continued to show activity gains during the 45-day, census active window of May 9 to June 22. The count rose to 725, an increase of 28 units or 4%. 8 NOVEMBER 2014 / WorldOil.com Active This is the highest number of active rigs recorded for the global offshore mobile fleet since statistics started being kept in This compares to an active count of 697 in 2013, and it is the first time that the count has surpassed the 700 mark. With the exception of platform and inland barge rigs, all offshore mobile units are included in these figures. Utilization didn t change much in 2014 for the fleet, since both available rigs and active rigs increased at similar rates. It fell just one percentage point to 81%, Fig. 7. U.S. INDUSTRY TRENDS In addition to looking at rig statistics, the census determines the total number of rig owners each year. The number of owners has, essentially, leveled off for the last several years, with the number of new drilling companies being added balancing closely with the number of companies ceasing operations. For 2014, the net number of rig owners increased slightly, by six companies, to 319, Fig. 8. Drilling contractors always have owned considerably more drilling rigs than operators, although the percentage of operator-owned rigs has grown slightly over the years. For 2014, the operators portion of the fleet went up to 15%, a one-percentage-point increase. This translates to operators owning 472 rigs out of the 3,254 total units. Contractors own 85% of the fleet, or 2,782 rigs. Rig ownership in the U.S. also can be examined by the fleet sizes of individual companies. When industry consolidation began accelerating in the late 1980s, many companies grew quickly as they bought up their competitors. These larger companies (those with more than 20 rigs) continue to hold the largest percentage of the fleet, again, this year, about 59% of all rigs. However, when the market is good, new companies tend to enter the drilling arena. There are 87 companies that own a single rig and are able to capitalize on unique market conditions in their area of expertise. CREW CONCERNS An annual survey is mailed out to drilling contractors every summer, inviting them to provide data about their current business environment and their opinions about the industry. The 2014 survey was completed by 39 contractors, which is about 12% of all U.S. rig owners. A variety of company sizes and regional areas were represented by this year s respondents. Every year, owners are asked to rank a list of eight key issues that are typically of concern in the industry. In recent years, three issues have continued to surface as the top concerns. Crew Availability was the number-one problem mentioned in 2014, moving Rig Rates, the top problem in 2013, down in importance. The skilled labor shortage is becoming acute and may be slowing the industry s rate of growth. The second-highest problem this year is Government Regulation, remaining in the same position as last year. For the past several years, there has been anxiety about new mandates that could impact the drilling industry in a negative manner. Hydraulic fracturing, especially, has been on the regulation forefront recently. Rig Rates were ranked as the

9 Fig. 8. U.S. rig owners, Number of rig owners Note: 2002 data point is an estimate. third-highest problem this year, after falling from the numberone ranking in Although rates affect profitability and are always a concern, when active rig counts climb and business is better, other issues tend to move up in importance. More advanced mobile rigs may be able to demand higher rates in some areas. However, better rig rates can only go so far in helping alleviate severe crew shortages, when crucial training time is needed, Fig. 9. Respondents are asked to share some of their company s current business figures. Labor rates on average have gone up another 5% over the past year, and continue to rise as companies try to recruit and maintain crews. The cost of insurance and benefits also has an impact on expenses, which continue to escalate. Rig maintenance is another significant expense for contractors, and it tends to increase annually. This year, contractors told us that maintenance costs were going to be about 2% higher than in There are still a number of older rigs in the fleet that are very costly to maintain. Contractors told us that, on average, their rig activity has gone up almost 8%, compared to a year ago. This estimated percentage is a little lower than the overall increase of 10% measured in the census this year. Respondents also had an average increase of 2% in their land rig rates over the past year. This increase is in line with higher rig activity, but does show that rates have not kept up with activity levels. Contractors seem optimistic that rig activity will continue to improve over the next year, and they forecast an increase of almost 7% for Along with horizontal drilling and hydraulic fracturing, pad drilling has been one of the most important innovations in recent industry history. Therefore, a new question was added to the survey this year, which asked contractors to estimate what percentage of their wells used pad drilling. This number was almost 31%, a significant percentage for a technology that has been around for less than a decade. In actuality, we know that in many of the big plays and among some operators, an even higher percentage of wells are drilled using pad drilling. CONTRACTORS PLAN TO EXPAND FLEETS The 2014 Contractor Survey also asked rig owners to choose among several statements that best described their company s plans for the next five years. Recent economic prosperity, and an optimistic outlook, are apparent in this year s results. About 51% of contractors told us that they expect to Fig. 9. Top contractor concerns No.1 Rig rates No.2 Government regulations No.3 Crew availability No.1 Crew availability No.2 Government regulations No.3 Rig rates Expand Current Fleet in the next few years. With advanced technology, rigs are able to optimize output at a faster rate, so it isn t surprising that a majority of contractors would expect to increase profits by adding newer models to their fleets. The next highest number of responses, 31%, included contractors who predicted No Plans for Change in the next five years. Fewer owners checked the boxes for Unknown (10%), Diversification into Other Businesses (8%), Pursuing International Opportunities (5%), Seeking Merger Opportunities (5%), and Downsizing Current Fleet (3%). It is important to note that contractors were allowed to choose more than one category, so the total is greater than 100%. FORECAST FOR 2015 The outlook for 2015 is more of a good news/bad news scenario. Market conditions remain good in North America, especially in the shale plays and other unconventional resources. Demand for the best rigs is expanding. Advances in rig technology will continue to improve drilling efficiency, safety, and the environmental impact of drilling. Growth in land rigs is expected in Canada, Latin America and the Middle East. The offshore global mobile fleet will continue to add to its numbers with state-of-the art rigs. Furthermore, analysts expect the world s energy consumption to continue to grow. However, combining higher rig efficiency with crude prices that have slumped in recent days, does impact our optimism. It s possible that in 2015, if supplies are still high, U.S. utilization may fall slightly, since fewer rigs will be necessary for new production. Hopefully, the recent commodity price dip is just an aberration, and this dynamic industry will continue to prosper in innovative ways. ACKNOWLEDGEMENT NOV partnered with several companies to collect industry statistics published in this article. IHS is the primary source used for the U.S. land rig fleet and global offshore mobile fleet. Nickle s Energy Group is the principal source for the Canadian figures. Information for some areas, particularly the international fleet, was collected and analyzed by NOV personnel. The following individuals are recognized for their specific contributions to this year s rig census: Tom Kellock (IHS); Jacoby Garcia (RigData); Melissa Brouillard, Franklin Pinerua Cardozo, Kristin Gilbertson, Keith Joseph, David Nassif, Tim Tynan, Adriana Vizcarrondo (NOV). BRANDON MONTAGNE is the director of Market Intelligence for NOV s Wellbore Technologies segment. He began his career with NOV Downhole in Houston, seven years ago. At NOV, Mr. Montagne has held various other positions, including Commercialization Process manager and then Market Intelligence manager. He received a BBA degree in marketing from Sam Houston State University in TORY A. STOKES is a consultant for NOV s Downhole division, after being employed at ReedHycalog as senior marketing analyst for eight years. She graduated with a BS degree in applied mathematics from Texas A&M University in 1985, and earned an MBA from the University of Houston in World Oil / NOVEMBER

10 U.S. rig census historical data, Depth rating, ft Unit % Util. Driller Operator Over 16,000 to 13,000 to 10,000 to Year Available change change Active rate Idle owned owned 20,000 19,999 15,999 12, , ,654 83% 552 2, , % 2,836 87% 441 2, , % 2,519 82% 557 2, , % 1,909 64% 1,062 2, , % 2,476 81% 581 2, , % 2,150 70% 927 2, , % 2,064 74% 710 2, , % 1,835 72% 720 2, , % 2,002 72% 779 2, , % 2,048 74% 704 2, , % 1,934 74% 680 2, , % 1,714 68% 810 2, , % 1,573 65% 835 2, , % 1,508 71% 603 2, , % 1,649 80% 411 2, , % 1,331 70% 567 1, , % 1,308 70% 551 1, , % 1,381 78% 387 1, , % 1,473 83% 294 1, , % 1,769 93% 125 1, , % 1,877 93% 151 2, , % 1,979 90% 225 2, , % 2,399 97% 83 2, , % 2,785 98% 66 2, , % 2,874 90% 308 3, , % 3,542 96% 130 3, , , % 4,703 98% 100 4, , , % 3,225 57% 2,419 5, , , % 2,539 48% 2,734 5, , , % 3,090 67% 1,490 4, , , % 2,625 60% 1,784 4, , , % 1,052 26% 2,941 3, , , % 1,388 42% 1,943 3, , % 1,532 56% 1,220 2, , % 1,444 57% 1,098 2, , % 1,677 72% 643 2, , % 1,485 66% 766 2, , % 1,192 60% 804 1, , % 1,279 69% 574 1, , % 1,221 66% 620 1, , % 1,232 71% 497 1, , % 1,263 77% 386 1, , % 1,447 87% 218 1, , % 1,305 77% 400 1, , % % 784 1, , % 1,215 74% 421 1, , % 1,593 93% 129 1, n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a , % 1,334 78% 385 1, , % 1,674 84% 314 1, , % 1,920 95% 106 1, , % 2,200 96% 98 2, , % 2,402 85% 415 2, , % 2,541 83% 535 2, , % 1,264 40% 1,905 2, , % 2,024 64% , , % 2,059 67% 1,022 2, , % 2,248 75% 758 2, , % 2,055 67% 1,000 2, , % 2,269 70% 985 2, AVG. 2, % 1,948 74% 744 2, Note: The data for 1953, 1954 and 2002 are not available. 10 NOVEMBER 2014 / WorldOil.com

11 Power source Rig type 6,000 to 3,000 to Mechanical Inland Offshore Bottom Offshore Subtotal 9,999 5,999 SCR/Elec. Diesel Gas Steam Land barge Floating platform supported stationary offshore 1, n.a. n.a , , n.a. n.a , , n.a. n.a , , n.a. n.a , n.a. n.a , , ,039 1, , ,092 1, , , , ,027 1, , , ,040 1, , ,051 1, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,209 1, ,208 1, ,145 1, ,116 1, ,140 1, n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a ,127 1, ,361 1, ,423 1, ,472 2, ,104 1,713 2, ,170 1,906 2, ,211 1,958 2, ,316 1,837 2, ,386 1,695 2, ,499 1,507 2, , , , , n.a. 2, World Oil / NOVEMBER

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