Chairman’s editorial

Posted on 18 November 2008

Wall Street crash triggers worries, but let’s focus on the positives

John Lindsay, Chairman

As I write this editorial, we are in the midst of the biggest one-week stock market melt-down since the Great Depression. As a result, many in the industry are experiencing fear, anxiety and uncertainty regarding not only Wall Street but also the direction of commodity prices and drilling budgets, and the outcome of the presidential election, to name a few.

I have always believed the axiom, “Things aren’t usually as bad or as good as they seem,” and being a drilling contractor, like many of you, I am the eternal optimist. Since we have very little control over many of the events that are causing the fear and uncertainty today, I have chosen to highlight a few of the achievements and positive trends that drilling contractors, service companies and E&P companies can be proud of in 2008.

The achievements and positive trends:

IADC members have achieved the best safety record in history while reaching an active rig count not seen since the 1980s. This is a monumental accomplishment marked by these facts … drilling contractor employees working around the world are seven times less likely to be injured on a working rig today versus 20 years ago. Another way to look at this achievement is that less than half of 1% of all employees will sustain a disabling injury this year.

What makes this safety achievement even more remarkable is today’s more modern fleet, along with all the latest technology advances, including bits, mud, directional drilling advances, and the list goes on. A rig today is making more footage per day than ever before. The current US fleet of 2,200 rigs will produce 62% more footage per rig than the 1981 fleet of 4,000 working rigs in a safer and more environmentally friendly way.

Our industry is investing more time and money on personnel development and training our people more effectively today than ever before. Job opportunities abound in our industry, and compensation is very attractive to lure new people to this industry.

Unconventional resource plays have changed the business as we knew it. High depletion rates require E&P companies to drill more and more wells in order to maintain gas and oil production, and that drives improved contractor activity and reinvestment opportunities.

Not only do unconventional plays require more wells to be drilled, but over 50% of all wells in the US drilled in 2008 will utilize horizontal and/or directional drilling, up from 20% in 2003. More difficult drilling puts demands on rigs, people and other services, creating opportunities for operators, service companies and contractors to re-tool their fleets with advanced-technology equipment and systems, enabling further safety and environmental improvements.

We should be proud of these achievements, and there are many others I failed to mention. As an industry, we have much to be thankful for, and opportunities are plentiful regarding the future.

Finally, companies in the energy business have done very well during the up-cycle from 2005 to 2008. Today, Wall Street under-values the energy industry because the market tends to move on fear, not necessarily on facts. Long-term energy fundamentals appear to provide us hope for another up-cycle. We can’t control the market, but we can set our companies up for continued success.

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