Higher crude price, lower breakeven price, and declining production from mature fields are the factors driving the global land drilling rig market.
September, 2018: OPEC and Russia’s production cut agreement helped the inventory level to come down, and increase the crude oil price. The price touched USD 80 per barrel in May 2018, and is currently fluctuating between USD 70 and 80 per barrel, which is well above the onshore breakeven price of several regions, helping the oil and gas operating companies to improve their financials. However, the effect of the improvement was not universal. The United States and Canada witnessed increase in utilization by two times and one and half times, respectively, but still less than 50%, for both. While other regions registered marginal improvement.
The low utilization rate is also due to the more efficient rigs, capable of drilling more footage and more well, and pad drilling. In the last few years, operators are moving conclusively toward the use pad dominated drilling programs, resulting in lower demand for rigs. The oil and gas operators are demanding for newer and higher specification drilling rigs, such as AC rigs that are generally operating at higher overall utilization levels and dayrates than the lower specification rigs, such as mechanical or SCR rigs. As a result, a significant number of lower specification rigs are being cold stacked, and/or removed from service.
The year 2018 is expected to be more positive, as the operating companies are ready to spend more, on account of high crude oil price. As a result, projects were put on hold due to high cost, and are expected to come online. Increasing exploitation of unconventional reserve is one of the major drivers for the land drilling rig market. The United States, the largest drilling market currently, had drilled 12,926 wells in 2017, 79% more than 2016, and wells drilled in the first half of 2018 is 35%, more than what were drilled during the same period of 2017. Permian basin accounted for the largest share in the new crude oil produced in the recent times. Other factors driving the market are low operating cost, and drilling more wells to address the declining production from mature fields.
The report “Land Drilling Rig Market Segmentation by Type, by Drive Mode, by Geography” is now available, and can be purchased directly at: https://www.mordorintelligence.com/industry-reports/land-drilling-rig-market
Land Drilling Rig market segmentation, based on depth, type, and regional coverage:
Land Drilling Rig Market by Type
Land Drilling Rigby Drive Mode
Land Drilling Rig by Region
Middle East & Africa
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