H&P explains trends in US shale drilling rig counts, utilization

By Luke Geiver | July 30, 2019

The focus by U.S. shale producers on capital discipline is impacting the drilling sector. Helmerich & Payne Inc. updated investors on the effects of capital spending by its E&P clients during its second quarter call. The message from H&P indicated drilling rig count and utilization is softening, and will continue on that trend, for the next few months. By the end of 2019, however, H&P believes it will start to see an uptick in rig utilization again.

“Our sentiment is that we should start to see some improvement when the customers recalibrate in the final quarter,” said John Lindsay, president and CEO. According to Lindsay, the majority of rigs releases by customers have happened due to project completions or budget focus, not on the price to run the rig.

H&P’s super spec rigs designed for the fastest, most efficient and best drilled wells are still nearly 90 percent utilized by industry. “We continue to see consistent demand for high performance rigs,” Lindsay said, noting that operators are continuing to drill more complex wells, longer laterals and tighter well spacing.

While H&P and other drilling rig firms weather the slower months of 2019, there is a bright spot. New technology is showing its value across several plays. According to Lindsay, H&P’s AutoSlide technology—an automated drilling rig software option—is helping clients gain capital certainty. Using AutoSlide, drilling engineers can ensure well bores are drilled in zone and human error is minimized.

“We believe this market environment, with its renewed emphasis on spending discipline and returns, is ideal for demonstrating the benefits of H&P’s software solutions and the meaningful impact these technologies have on well economics through enhanced wellbore quality and placement,” Lindsay said.

AutoSlide is currently operating on rigs in the Bakken, Midland Basin, Eagle Ford and SCOOP/STACK. Later this year, H&P will add the technology to a rig in the Delaware Basin.

For the fourth quarter, H&P expects U.S. rig expenses per day to run between $14,350 to $14,850.

Roughly 86 percent of H&P’s revenue stems from U.S. operations. The company has 350 rigs available, with 220 currently contracted (60 percent). The Super-spec rigs—H&P’s highest technology, most capable rigs—are the most utilized of any rig at 90 percent. Through 2019, H&P has roughly 140 rigs already contracted for the full year. In 2020, more than 70 rigs are contracted and in 2021, almost 25 rigs are already contracted out.

By play, H&P has rigs in the following places:

Bakken: 8

SCOOP/STACK: 25

DJ Basin: 5

Permian: 114

Eagle Ford: 39

Haynesville: 10

Appalachia: 12