Thursday, February 13, 1997

Heightened trend predicted for oil/gas exploration

By WILLIAM GARLAND / Harte-Hanks Washington Bureau

WASHINGTON - Analysts continue to predict a heightened trend for U.S. oil and gas exploration this year, including a sizable jump for drilling in Texas as well as the Gulf of Mexico.

The number of U.S. wells is expected to rise by 9.2 percent, driving a worldwide increase of 1.6 percent, according to the publisher of World Oil magazine. The outlook, based on a survey of 22 major and 205 independent oil companies, was included in an annual publisher's letter to industry executives.

"Texas remains the U.S. drilling leader and, worldwide, is surpassed only by two countries, Canada and China," said the publisher's letter. "The state's 12 Railroad Commission districts will drill 8,590 wells, up 9 percent from 1996."

Publisher Rusty Meador pointed out that 40 percent of the state's activity would occur in three of the commission's districts in West Texas.

Oklahoma was expected to see an increase of 6.2 percent to 2,070 wells while operators in Kansas were projected to drill 1,610 wells, up 5.9 percent, "looking for relatively shallow oil and gas." New Mexico also was expected to be active with an increase of 13 percent to 1,055 wells, spurred by development in the state's southeast Permian Basin region.

Broken down by industry sector, the magazine found that the 22 major companies in the survey planned to drill 4,947 wells, up 10 percent from 1996. Independents continued to reflect enthusiasm, also picked up in other recent surveys, planning to drill 3,030 wells, "a strong 27 percent increase" over last year.

"Independents note new property development, stronger cash flows and more offshore exposure as primary reasons" for increasing spending and activity.

"The U.S. Gulf of Mexico will be the world's offshore hot spot, again, as a healthy 1,110 wells are expected," an increase of 8.6 percent over 1996, said Meador. "If rigs and crews were readily available, the total would likely go even higher."

Availability of rigs and crews also was cited as an onshore factor. "Onshore oil provinces are being looked at again after a few years of neglect," the publisher said. "Principal concerns are that the service industry cannot respond with needed rigs, equipment and personnel, particularly the latter."

"With the excess capacity bubble gone, gas drilling is strong in southern, Midwest and offshore areas where pipeline capacity provides access to seasonal price surge areas."

Recent rig counts by Baker Hughes Inc. showed the strength of the recent upswing in Texas. At the end of January, the state continued to lead in activity with 304 active rigs, up 63 units from a total of 241 a year earlier. Other states lagged behind Texas in the increase compared to last year, with New Mexico and North Dakota ranking second with increases of seven active units apiece.