Land Drilling Dynamics
Land Drilling Dynamics Market Outlook Denver Society of Petroleum Engineers May 2008
Richard J Mason Land Rig Newsletter www.landrig.com
The Set Up 2008 Forecast mid-February: Flat 2008 Rig Count Abundant Natural Gas Scenario Low Growth Operator Capex Plans
Land Rig Newsletter
The Set Up Canada
2008 Forecast mid-April: An Expanding 2008 Rig Count LNG A Bing Crosby Market:
“Accentuate the Positive, Eliminate the Negative”
Storage
Commodity Prices Land Rig Newsletter
LNG Imports Q1 A Year Makes A Difference X Bcf 315
Barnett Shale Comparison Q1 2008
210
105
0
2007
2008 EIA
Land Rig Newsletter
Revenue Surge Domestic Industry Revenue Model 32
62 % Oil
24 16
59 % Gas
Oil
8 0
Gas 2005
2006
2007
Land Rig Newsletter
Rig Demand By E&P Program Resource Plays Pause in 2007 980
10 or More Rigs
740
3 or Less Rigs 500
2005
2006
2007
Land Rig Newsletter
Rig Demand By E&P Program Activity Picking Up Across the Board 10 or More Rigs
980
740
3 or Less Rigs 500
2005
2006
2007
Land Rig Newsletter
Rising Well Complexity Nonvertical Drilling Rig Count 525
Horizontal
400
Directional 275
150
2005
2006
2007
Land Rig Newsletter
Rising Well Complexity Nonvertical Footage Quarterly 7.0
Barnett Colorado/Wyoming Directional
5.1
3.2
2006
2007
X 1 million feet
Land Rig Newsletter
Improving Rig Efficiency Aggregate Footage Top 75 Rigs 25
21
Annual Footage X 1 million 17
2001
2004
2007
Land Rig Newsletter
Regional Nonvertical Markets Horizontal Footage X 1 million feet ArkLaTex Barnett Fayetteville
6
4
2
Bakken Shale
0
2006
2007
RigData
Land Rig Newsletter
Operator Rig Employment Smaller E&Ps Influence Rig Demand 560
Total E&Ps Employing Land Rigs
530
500
470
2004
2005
2006
2007
Land Rig Newsletter
Land Fleet Demographics Quarterly Averages By Horsepower Class 775
500-999 575
1,000-1,499
375
1,500-1,999
175
< 499 2006
2007
RigData
Land Rig Newsletter
Land Fleet Demographics Data as of May 3, 2008 By Horsepower Class 775
500-999
575
1,000-1,499 1,500-1,999
175
< 499 3/ 0
2007
5/
2006
8
375
RigData
Land Rig Newsletter
Vertical Footage Conventional Drilling Proxy X 1 million feet Quarterly 48
45
Quarterly X 1 million feet
42
2006
2007
Land Rig Newsletter
Regional Footage Quarterly Footage, 2005-08 X 1 million feet Rockies ArkLaTex Permian Basin
16
12
8
2005
2006
2007
2008 RigData
Land Rig Newsletter
Operator Rig Employment Marketshare by Class X Percent 50
Private O&G Large/Midcap
40 30 20
Majors/Supers 10
Utilities
0
Q2 07
Q4 07
Land Rig Newsletter
Quarterly Revenues By Contractor Class X $1 billion 3.6
National Drillers
2.4
1.2
0
Regional Drillers 2004
2007
Land Rig Newsletter
Outlook 2008 Oil and Gas Company View: Bullish Got Shale? Copy Cat Announcements Seeking Headline Marketshare Bakken (oil) Marcellus (gas) Haynesville (gas)
Land Rig Newsletter
Outlook 2008 Good News for Contractors Got Rigs? Up to another 150 rigs go to work by year end Marketed Fleet Grows by 100 units to 2,450 Pricing Strengthens 2nd Half of 2008 But so do costs
Land Rig Newsletter
Deal Killers Economy Weather In a High Demand Scenario The Consumer Determines Outcome Hurricanes
Land Rig Newsletter
Richard J Mason Land Rig Newsletter www.landrig.com
The Set Up 2008 Forecast mid-February: Flat 2008 Rig Count Abundant Natural Gas Scenario Low Growth Operator Capex Plans
Land Rig Newsletter
The Set Up Canada
2008 Forecast mid-April: An Expanding 2008 Rig Count LNG A Bing Crosby Market:
“Accentuate the Positive, Eliminate the Negative”
Storage
Commodity Prices Land Rig Newsletter
LNG Imports Q1 A Year Makes A Difference X Bcf 315
Barnett Shale Comparison Q1 2008
210
105
0
2007
2008 EIA
Land Rig Newsletter
Revenue Surge Domestic Industry Revenue Model 32
62 % Oil
24 16
59 % Gas
Oil
8 0
Gas 2005
2006
2007
Land Rig Newsletter
Rig Demand By E&P Program Resource Plays Pause in 2007 980
10 or More Rigs
740
3 or Less Rigs 500
2005
2006
2007
Land Rig Newsletter
Rig Demand By E&P Program Activity Picking Up Across the Board 10 or More Rigs
980
740
3 or Less Rigs 500
2005
2006
2007
Land Rig Newsletter
Rising Well Complexity Nonvertical Drilling Rig Count 525
Horizontal
400
Directional 275
150
2005
2006
2007
Land Rig Newsletter
Rising Well Complexity Nonvertical Footage Quarterly 7.0
Barnett Colorado/Wyoming Directional
5.1
3.2
2006
2007
X 1 million feet
Land Rig Newsletter
Improving Rig Efficiency Aggregate Footage Top 75 Rigs 25
21
Annual Footage X 1 million 17
2001
2004
2007
Land Rig Newsletter
Regional Nonvertical Markets Horizontal Footage X 1 million feet ArkLaTex Barnett Fayetteville
6
4
2
Bakken Shale
0
2006
2007
RigData
Land Rig Newsletter
Operator Rig Employment Smaller E&Ps Influence Rig Demand 560
Total E&Ps Employing Land Rigs
530
500
470
2004
2005
2006
2007
Land Rig Newsletter
Land Fleet Demographics Quarterly Averages By Horsepower Class 775
500-999 575
1,000-1,499
375
1,500-1,999
175
< 499 2006
2007
RigData
Land Rig Newsletter
Land Fleet Demographics Data as of May 3, 2008 By Horsepower Class 775
500-999
575
1,000-1,499 1,500-1,999
175
< 499 3/ 0
2007
5/
2006
8
375
RigData
Land Rig Newsletter
Vertical Footage Conventional Drilling Proxy X 1 million feet Quarterly 48
45
Quarterly X 1 million feet
42
2006
2007
Land Rig Newsletter
Regional Footage Quarterly Footage, 2005-08 X 1 million feet Rockies ArkLaTex Permian Basin
16
12
8
2005
2006
2007
2008 RigData
Land Rig Newsletter
Operator Rig Employment Marketshare by Class X Percent 50
Private O&G Large/Midcap
40 30 20
Majors/Supers 10
Utilities
0
Q2 07
Q4 07
Land Rig Newsletter
Quarterly Revenues By Contractor Class X $1 billion 3.6
National Drillers
2.4
1.2
0
Regional Drillers 2004
2007
Land Rig Newsletter
Outlook 2008 Oil and Gas Company View: Bullish Got Shale? Copy Cat Announcements Seeking Headline Marketshare Bakken (oil) Marcellus (gas) Haynesville (gas)
Land Rig Newsletter
Outlook 2008 Good News for Contractors Got Rigs? Up to another 150 rigs go to work by year end Marketed Fleet Grows by 100 units to 2,450 Pricing Strengthens 2nd Half of 2008 But so do costs
Land Rig Newsletter
Deal Killers Economy Weather In a High Demand Scenario The Consumer Determines Outcome Hurricanes
Land Rig Newsletter
