The U.S. at present has some 1,700 land rigs, and rig contractors could add up to 191 new and refurbished rigs to the domestic fleet during the next 12 months, according to estimates by Waqar Syed, an analyst with Petrie Parkman & Co. This substantial addition of nearly 200 rigs still falls short of demand, however. Operators would like to have an additional 250 rigs a year added to the U.S. land fleet. Most of today's interest is in 1,000- to 1,500-horsepower rigs, which typically drill to depths between 8,000 and 15,000 feet. Dayrates for these rigs are climbing along with the strong demand. Newly built 1,000-horsepower rigs are commanding dayrates of $18,000 to $18,500, generating daily margins in the $10,000 range. Major drilling contractors are currently reporting average margins in the range of $6,200 to $8,200 per rig-day, and Syed forecasts average margins will hit $10,000 per rig-day next year. That level is what contractors often cite as meeting replacement-cost economics for a 1,000-horsepower rig. (Dayrates for the larger 2,000- to 3,000-horsepower rigs still languish well below replacement costs.) Land rigs in the 1,000-horsepower category typically cost $10 million to build, which takes about eight months from order to delivery. Currently, U.S. manufacturers can supply 10 new rigs per month and Chinese manufacturers can contribute another five per month, for a total of 180 new-builds a year. Compared with recent trends, that's very good news, although during the rig-building frenzy in the 1980s, peak manufacturing capacity was 240 rigs a month, or an incredible 2,880 units per year. For more on this, see the October issue of Oil and Gas Investor. For a subscription, call 713-993-9320, ext. 126.
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