HOUSTON — Growing demand for walking rigs may finally improve the market for land drilling contractors in the U.S., the chief executive of Nabors Industries said Wednesday.
Daily rates for the highly specialized, mobile rigs have begun to increase as more U.S. oil companies use multiwell drilling platforms called pads, Nabors Chairman and CEO Tony Petrello told investors in a conference call. Nabors shares surged Wednesday.
North American drillers have generally lost ground on pricing and rig use as pad drilling and other efficiencies have become common in the Bakken Shale in North Dakota and other major shale plays. A turnaround in the drilling business could lift land drillers out of an earnings slump.
“We believe we’ve seen the bottom,” Petrello said, adding that rig rates increased modestly in the fourth quarter of 2013, but could rise higher this year. “We believe we could deploy more (advanced rigs) in the field and see more demand.”
Nabors’ fleet of about 150 pad-compatible walking rigs saw 94 percent utilization in the fourth quarter, while demand for its older, mechanical rigs has continued to lag behind. And there’s often a high premium price attached to the advanced rigs. It’s a shift in industry spending that has unleashed the nation’s oil output, and has forced smaller land drillers to replace older rigs in order to keep up with giant oil field service companies like Schlumberger.
During the last three months of 2013, the company raked in four times as much profit as it had in the same period the year before, as international drilling markets remained highly active and U.S. rig demand picked up.
So far in the first quarter, though, unusually severe winter weather has cost Nabors several days of rig operations in the U.S. But its outlook for the year remains favorable as rates improve, Petrello said.
The U.S. hydraulic fracturing business has proved more stubborn. A crippling glut in pressure pumping equipment pushed price tags for frac jobs lower over the past two years. Nabors has been able to replace expired pressure pumping agreements but at “a significantly lower rate,” Petrello said.
Still, he added, pricing for frac jobs have begun to stabilize, and the multiplication of shale wells could drive higher demand for services as oil companies reach a plateau on efficiencies.
Across the oceans, increased drilling could lift daily rig rates in international markets as the number of idle rigs declines. And Nabors could see higher international earnings in the second half of the year, when it anticipates rolling out more rigs, Petrello said.
The company is looking to spend $1.6 billion to $1.8 billion in capital expenditures this year, much of it on technological upgrades to its rig fleet.
And it may sell barges and work-over jackup rigs in the Gulf of Mexico, and it is also looking for buyers for natural gas assets in Alaska, Nabors executives said.
Nabors shares rose 13.5 percent in early trading Wednesday to $21.18 on the New York Stock Exchange.