DRILLING OUTLOOK
This focus on capital discipline will
likely have a trickle-down impact on the
rig market. Average asset utilization for US
onshore will likely end up falling between
80-85% this year, and Mr Spears said he
does not expect any significant change in
2023. For drilling contractors, their contin-
ued focus on capital discipline means they
are unlikely to bring newbuild rigs into the
market to meet demand.

“The operators and service companies
have been restructuring their balance
sheets so that they’re less burdened by
debt. Because of that, they’re going to be
less volatile, which means growth is prob-
ably not going to be as high as it might
have been before the last downturn,” Mr
Spears said.

In Q3 2022, leading-edge dayrates were
approaching the low-$30,000 range , a 25%
increase from Q3 2021. However, Mr Spears
said he does not expect that number to
increase significantly in the next year.

At most, he anticipates average dayrates
for US onshore to reach $32,000 in 2023 –
primarily because drilling activity is not
expected to grow at the same rate as it did
in 2022. “If things flatten out on the activ-
ity side like we think they’re going to do,
I don’t see how we get a lot of movement
on dayrates. The upward movement in
dayrates has been all about rising asset
utilization, but now most of the high-spec
rigs are under contract.”
As usual, the Permian Basin remains
the primary driver in US onshore activity,
and that is expected to continue into 2023.

Mr Spears estimated a 10% increase in the
basin’s rig count over the course of the
year, from 342 in 2022 to 376 in 2023, while
wells drilled will also see a 10% increase,
from 8,150 in 2022 to 9,000 in 2023.

Permian activity could see a boost due
to the planned addition of five natural gas
pipeline projects. If completed as planned,
they will increase the Permian’s takeaway
capacity by a total 4.18 billion cu ft/day
over the next two years, according to the
US Energy Information Administration
(EIA). Three of these pipeline projects
– Kinder Morgan’s Gulf Coast Express
Pipeline Expansion and Permian Highway
Pipeline, and Whistler Pipeline Capacity
Expansion led by Whitewater and the
MPLX joint venture, are expected to come
on stream in 2023.

Top: US onshore crude oil production is expected to rise from 11.9 million bbl/day in
2022 to 12.75 million bbl/day in 2023, a 7% increase, according to Spears and As-
sociates. Middle: Spears and Associates projects a 3.5% increase in US natural gas
production from 2022 to 2023, aided by the addition of several new pipeline proj-
ects under way. Bottom: US onshore rig count increased by 53% from 2021 to 2022,
as activity rebounded from the post-COVID oil price downturn. Spears and Associ-
ates anticipates a more modest 9.2% increase in rig count for 202 3 because most
of the high-spec rigs are already under contract. This means there will also be less
upward movement in dayrates next year.

Any delays in the construction or per-
mitting for these pipelines could negative-
ly impact the forecasted drilling activity
growth, Mr Spears said. “It takes a long
time to get a pipeline built, even in the
state of Texas, so that’s a bit of a wildcard:
How soon can we get to full utilization on
the pipeline side out of the Permian?”
DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022
19