As bad as drilling markets have been, there is growing fear among drillers that not only is there no relief in sight, but conditions actually could be worsening. Certainly the brief return of WTI to below $30/bbl this month has contributed to that darkening outlook. Adding to drillers’ worries are the comments by some operators in earnings calls that they will continue to extract price concessions from service providers in order to keep even minimal drilling programs afloat. 

Leading-Edge Day Rates

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Overall Review: Leading-edge day rates flat to down the past 3 months. Two-thirds of contractors surveyed thus far in February reported leading-edge day rates stabilized during the past 3 months, less than the 77% of contractors that responded similarly in the prior survey. The remaining third of drillers said that leading-edge rates had decreased again, compared with 23% in the prior survey. None of the contractors in the current survey reported any increases. Rig pricing during the next 6 months is expected to remain the same, according to 66% of surveyed drillers. However, another 28% expect more decreases, ranging from 5% to 10%. The remaining 6% of drillers were uncertain over the direction of rates for the upcoming 6-month period. 

Rig Demand Indicators

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Overall Review: Market conditions worsen. Among drillers responding to changes in key rig demand indicators month-to-month during the current survey:

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• - 8% reported no change vs. 34% in the prior survey. 

• - 92% reported worsening indicators vs. 66% in the prior survey. 

• - 0% reported improving conditions matching the 0% in the prior survey.

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All 35 drilling contractors in the current survey reported having rigs stacked within their ranks. Among them, 46% reported that their entire fleets were idle. Meanwhile, 96% of all work performed in the field by surveyed contractors is spot work only. Only 3% of work performed is tied to term contracts, and the remaining 1% is multi-well programs. 

Work Outlook 

Overall Outlook: Work volumes expected to be low during next 6 months. More than 25% of drillers surveyed to date expressed uncertainty over the volume of work that is headed their way over the next 6 months. However, 43% expect work volumes to be steady but low during the same period. Another 14% of drillers expect work volumes to decline again, but 17% expect a slight uptick in activity.