Business is starting to boom in North America for oilfield services companies, thanks to better drilling techniques – even if the rig count numbers don’t reflect it.
Stable natural gas and oil prices and in production volumes should mean renewed revenue growth for the second quarter, according to Richard Spears, author of the Oilfield Market Report.
Barclays agreed, writing in a Friday report that “despite a limited rig count recovery to-date, activity levels in the U.S. land market are improving and well counts are rising more rapidly than rig counts.”
The number of rigs drilling domestically, traditionally a barometer of drilling activity, has stayed about the same in 2013, but well productivity is continuing to grow, according to two separate analyst reports issued Friday morning.
“The rig count has lost its status as not only the leading, but even a reliable, indicator of oilfield services demand/activity,” Wells Fargo wrote in a report surveying the oilfield sector. “It’s been invalidated by the acceleration in drilling productivity.”
Producers are producing roughly the same amount of natural gas, even though the number of rigs have dropped by about 600 rigs in 2013 from its high in 2011, Simmons reported at an energy conference in May.
The productivity has been the result of a variety of factors. Modest increases in pressure pump efficiencies over the last six months have made drilling rigs even more efficient. Operators are increasingly moving to pad drilling to develop unconventional resources, which enables more wells to be drilled from the same rig.
As a result, analysts now look at well counts, the percentage of wells that are unconventional and the total well footage to assess productivity.
“On the back of those trends, aggregate industry demand has continued to set records, in, for example, total pounds of proppant, gallons of fluid, and frac stages consumed,” Wells Fargo wrote.