Sept. 2001 Vol. 222 No. 9  Drilling

Robert E. Snyder,  Editor

Capital spending survey; newbuild land rigs

Significantly higher revenues from producing activities, driven by strong oil/gas prices, fueled a doubling in capital expenditures and a 73% increase in exploration and development (E&D) activity in North America during 2000, compared with a capital spending decline of 14% throughout the rest of the world, according to the 2001 edition of Andersen’s Global E&P Trends. "This year’s report reflects the boom the oil/gas industry has experienced over the past 18 – 24 months, and actions of the global energy industry to react to marketplace changes and opportunities," said Victor A. Burk, managing partner of Andersen’s energy and utilities industry practice. "Although these trends do not signal the beginning of a period of predictability in energy markets, we see signs that companies are positioning themselves better to manage successfully and sustainably through the cycles," he added.

North American drilling activity remains relatively high, creating a likelihood that North American E&D spending will continue to increase in 2001 and into 2002. There is also renewed interest among majors and independents in E&P investments in North America. Mergers and acquisitions, although not at the levels of the "mega deals" of 1999 and 2000, will continue to be a strategy for many companies to create value, increase production and reserves, and achieve cost savings, the report notes.

Worldwide upstream capital spending in 2000, which amounted to 58% of pretax operating cash flow, increased 30% to $124.1 billion on increases in all categories, led by proved property acquisitions, which rose 41% to $43 billion. E&D spending increased 24% to $81.1 billion, including a 21% rise in development spending to $53.2 billion. North American capital spending, U.S. and Canadian totals combined, jumped 116% to $70 billion, while capital spending outside North America declined 14% to $54.1 billion. E&D spending in North America, driven by high gas/oil prices, increased 72% to $36.2 billion, while the rest of the world total rose by just 1% to $44.9 billion.

U.S. upstream capital spending more than doubled to $55.8 billion, with a fourfold rise in unproved property acquisition costs, as well as increases in exploration (49%) and development (57%). Worldwide revenues from oil/gas producing activities increased 63% in 2000 to $270.6 billion, following 1999’s 38% increase to $166.5 billion.

The increases in E&D produced the highest reserve levels of the survey period, both in the U.S. and worldwide. Oil reserves rose 7% worldwide to 93.4 Bbbl and 19% in the U.S. to 19 Bbbl. Gas reserves increased 9% worldwide to 402.7 Tcf, and were up 18% in the U.S. to 114.5 Tcf. Gas discoveries and reserve extensions added more than 36 Tcf worldwide.

The benchmark Andersen survey, in its 22nd year, is a review and analysis of revenues and profitability, capital spending, oil and gas reserves, and performance measures over the five-year period from 1996 to 2000, for 155 publicly traded companies with proved reserves of more than 5 MMboe. These companies account for an estimated 87% of total U.S. crude oil and gas liquids reserves, and 68% of total U.S. gas reserves. The group includes 34 companies headquartered outside the U.S. To obtain copies of this survey, visit www.andersen.com/energyandutilities.

Newbuild land rigs. In case you wonder what onshore contractors are doing about rigs, as noted in The Oilfield Appraiser, Helmrich & Payne International expect to be taking delivery on 12 new land rigs in 2001. These are the new FlexRig design, being billed as recession proof, covering a wide range of depth ratings at competitive cost to traditional rigs.

The rigs are reported to cost around $9 million each. According to H&P, the new design and concept offers flexibility, mobility, safety and environmentally attractive operations. With the introduction of evolutionary technology to land drilling, this is said to be the first major improvement to land drilling since the introduction of top drives in the mid-1990s.

And H&P has 10 more FlexRigs on order, with delivery expected by first quarter 2003. The reported cost of the additional 10 rigs is about $10 million each, representing a substantial investment, but a considerable savings over the cost of traditional rigs, the report says.

Landing string article suggestion. The following contribution was offered by John A. Casner, Consulting Engineer, Kingwood, Texas. This letter is in reference to the very timely article, "Proven landing string design for ultra-deepwater application," in July’s World Oil. Richard J. Adams, the author, suggested the following options when it has been determined that the tensile capacity of the landing string is not adequate to run a long, heavy casing liner:

• Use a slip with a longer contact length to increase slip crushing capacity. Standard slips have 12 – 16-in. contact lengths. Slips with 18 – 22-in. contact lengths are available on a limited basis.
• Recalculate slip-crushing capacity using the coefficient of friction recommended by the slip manufacturer. This recommendation should be based on a specific lubricant.
• Increase minimum wall thickness requirement for the tube, to provide sufficient slip-crushing capacity.
• Select an alternate landing string.

Casner suggests there is another alternative which could be considered when all of the above options have been exhausted – i.e., when the thickest pipe that is available for the landing string is being used; the longest available slips are being used; and a lubricant is used on the back of the slips which has the highest practical coefficient of friction.

The slip-crushing constant for 6-5/8-in.-OD drill pipe with 16-in. long slips and a coefficient of friction of 0.08 is 1.59. If slips were not used to run the landing string, and the string was run using two elevators like are used to run sucker rods, it would be practical to use a tension safety factor of 1.3, instead of the slip crushing constant of 1.59. This would increase total allowable load for a 6-5/8-in.-OD landing string by 22%, which is a substantial increase. We thank Mr. Casner for his comments.