All seven regions covered by the Enverus Day Rate Survey saw rates rise sequentially for the second time in three months in January as confidence started to strengthen among U.S. land drilling contractors. All of January’s gains were modest, ranging between 0.58% and 1.36%. The U.S. composite rate rose $218 in January to $23,687.
The January results were a rebound after the anemic results of December, when only four of the seven regions rose, and the U.S. composite moved up just $9. The November survey was the first time all the regions moved higher since that May. The U.S. composite rate is down $555 from its May 2023 record but remains $402 higher YOY.
Despite expectations that activity in 2024 will be limited in gassier basins, Appalachia and the Ark-La-Tex were two of the three regions to increase by more than 1.0% in January. While only the Mid-Continent has a composite lower than Appalachia’s $22,186 in January, Appalachia’s $525 or 2.31% decline since May is close to the change in the U.S. composite. By contrast, Ark-La-Tex day rates have been the hardest hit over the past year.
“There is no appetite to spend money,” an Ark-La-Tex driller said in the latest survey. As Henry Hub prices have spent most of the past year below $3.00/MMBtu, the Ark-La-Tex active rig count has fallen by more than a third YOY and the region’s composite rate stands just $82 higher than a year ago. Despite the Ark-La-Tex composite rate’s $271 growth in January to $24,765, the region has fallen the most of any region since the May high, down $811 or 3.17%.
The top mover by dollar amount was the Rockies with a $308 gain to $26,490, still the highest day rate composite among the survey regions. The Rockies composite rate remains 3.08% above its January 2023 result, the highest YOY improvement.
The Enverus Day Rate Survey found rising optimism among drilling contractors. The overall market for drilling rigs is set to grow during the next six months based on the number of bid inquiries coming into drilling contractors’ offices, with nearly 55% of survey respondents saying inquiries were rising versus around 25% reporting declines. “We picked up a couple multi-year contracts, and we haven’t seen that in three to four years,” a Permian driller told the survey team.
Three-quarters of survey participants expect more work during the next six months compared to 57% during the prior survey. Most new 2024 capex budgets for field work have been finalized, and contract awards will be forthcoming based on the ramp in bid requests. The remaining 25% were evenly split between those expecting the same amount of work and those expecting less.
“People are complaining about the cost of everything,” a Mid-Continent driller told the survey team. While nearly 65% of drilling survey respondents reported daily operating costs are declining, many survey respondents reported bulk buying, strict adherence to equipment maintenance and declining labor costs as reasons for the declines.
To see the full results of the Enverus Day Rate Survey for January, check out the latest issue of Oilfield Pulse.
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