Marshall Adkins says,
Now that the first quarter of 2003 is behind us, we thought it would be important to highlight how the rig count is tracking relative to our initial expectations. Contrary to what earlier E&P budgets and many investors predicted, the rig count has actually been increasing significantly with higher commodity prices. If you’ll recall, we stated back in December that E&P
spending would be up more than 20%, as opposed to E&P spending surveys that were calling for flat to minimal year-over-year growth in spending. The U.S. rig count currently stands at 962 rigs, up 15% since the beginning of the year and up 26% from last year. (I guess it’s time to revise those E&P budgets?) This 15% upward move in the rig count is especially impressive given the fact that the rig count typically declines by 10% during this time frame. People have been asking for months now
when drilling activity would pick up. The fact is the rig count is off to one of its best starts in recent memory, up 15% since the start of the year. This runs in stark contrast to the year-end E&P spending surveys that called for minimal growth in spending.
The rig count shows no signs of cooling off either, with a 16-rig increase this past week. Additionally, the significant increase in drilling permits in the past few months provides even more visibility that this recent rebound in the rig count is not a flash in the pan. We believe the only factors that will prevent the rig count from increasing even more rapidly are infrastructure and
labor constraints. Accordingly, we are raising our 2003 rig forecast from 1,030 to 1,040 and establishing a 2004 U.S. drilling activity forecast of 1,200. Needless to say, these estimates are well above Street consensus. In summary, all of the leading indicators are pointing in the right direction and drilling activity should rebound back near the peak levels we saw in mid-2001. |
