Thursday, July 31, 1997

Gas, drilling exceed expectations

By WILLIAM GARLAND / Harte-Hanks

WASHINGTON - U.S. oil and gas drilling has continued to beat expectations, in spite of recent temporary dips in activity in Texas and Oklahoma, according to Baker Hughes Inc.

After surveying industry trends at the end of the second quarter, the Houston-based firm has again bumped up its projection for U.S. drilling this year - an economic plus for many areas where activity is up sharply from last year.

The average number of active drilling units this year now is forecast to be about 22 percent higher than in 1996, said Tony McAloon, Baker Hughes' director of market research.

At the end of the first quarter, the firm hiked its projection for 1997 to an average of 859 active rigs. In the latest projection after the second quarter, McAloon said the forecast for the year was lifted to an expected average of 954 active units, well above last year's average of 779.

The projection was somewhat lower than the total of 984 rigs in the latest weekly Baker Hughes rig count released Friday. Friday's count was up more than 200 rigs from a total of 774 during the same week a year earlier.

"Obviously the rig count has seen strong growth in the last 12 months," said the Baker Hughes representative, adding that the slide in oil prices since early this year appears to have had little impact on the outlook.

"We're looking at what our customers appear to be spending, talking to the customers" about their plans, he said. "Spending still seems to be pretty firm. Nobody appears to be changing any plans . . . because of the slight weakening in oil prices. It fits within their band" of expectations.

"Oil prices are probably going to trade in a range . . . (between) $18-to-$20," he said. "I don't think that scares anybody in terms of their budgetary plans, which are not based on high oil prices . . . Overall, gas looks to remain strong going into 1998" in terms of markets.

He said Baker Hughes was expecting "continued growth within the U.S. market (for drilling) on the order of about 15 percent . . . Onshore (will be) stronger than offshore because the offshore is constrained by the rig fleet."

Among recent slips for drilling "was a problem in Oklahoma two weeks ago, where the rig count dropped . . . and it was definitely weather related," he said. "This last week, Texas was down a bit . . . (with) a combination of numerous events that led to a decline, but we expect it to pop back up."

The counts for both states rose Friday, with rigs numbering 365 in Texas, an increase of 13 from the previous week, and 117 in Oklahoma, up 16.

McAloon said drilling for natural gas and for oil was expected to rise about proportionally this year compared to last year, keeping a strong edge for gas-directed drilling. The latest Baker Hughes projection for 1997 included an average of 559 rigs drilling for gas and 392 targeted for oil, reflecting a 59-to-41 percent tilt in favor of gas. A total of three rigs for 1997 were in a miscellaneous category.

In second quarter drilling statistics, the American Petroleum Institute reported last week that total oil and gas well completions had not yet caught up with substantially higher drilling. While gas well completions were up 3 percent in the quarter compared to a year earlier, oil and dry hole completions both were down 10 percent for the period, bringing down the overall number of completions by 5 percent in comparison to 1996.

Details about the latest Baker Hughes rig counts can be found at the company's Internet web site at www.bakerhughes.com.