Oilfield Svc Cos' 1Q Results Seen Weak On Drilling Delays
By DAVID BOGOSLAW
Of DOW JONES NEWSWIRES NEW ORLEANS -- There won't be much cause for celebration of first-quarter results in the oilfield services industry, except for a handful of companies focused on North American production that will benefit from the spike in natural gas prices and good winter drilling conditions in Canada.
Geopolitical uncertainty and the fear that commodity prices will plummet after the war in Iraq have stymied oil and gas producers' willingness to drill before they are sure where prices will settle.
But in North America, where there's growing recognition that a shortage in natural gas is developing, the number of rigs working is up dramatically since the beginning of the year.
Traditionally, the number of drilling rigs under contract drops during the first quarter because it's more expensive to operate in adverse weather. But this year, the rig count hit a low on Jan. 17 and has been up in six of the last eight weeks, Jim Wicklund, an analyst at Banc of America Securities, said.
"That is the earliest seasonal recovery and one of the sharpest drilling recoveries we've seen in many years," he said.
The need to replenish sharply lower natural gas storage supplies before winter ensures that the number of rigs under contract continues to rise through this year and next, Wicklund predicted.
Last year's injection season, during which supply is replenished and which begins after the end of winter, started with 1.7 trillion cubic feet in storage and increased to 3.2 trillion cubic feet by November. This year, with storage down to 600 billion cubic feet after a harsh winter, the industry will have to inject 2.5 trillion cubic feet, or 67% more gas, to reach the same storage levels as last winter, he said.first quarter of 2002,