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Tickers in this Article: RDC, EOG, ESV, HJK
Third-quarter earnings season has ended for the energy sector - a good time to look back and learn from the various earnings releases and management commentary that have been disclosed.

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Drilling Ramp
The exploration and production industry is planning a major ramp in activity in 2010, particularly in the high-growth oil and natural gas shale plays. This is occurring despite the absence of any evidence of a pick-up in industrial demand. EOG Resources (NYSE: EOG) is planning to increase drilling in the Haynesville, Bakken and Barnett Shales in 2010 relative to 2009. The company will be drilling 225 wells in 2010 in what it calls its Barnett "combo play". This is an area north of the natural gas-bearing fairway of the Barnett Shale, where the wells produce predominately oil. In 2009, it drilled only 100 wells here.

Petrohawk Energy (NYSE: HK) announced its capital budget for 2010 and will spend $1.45 billion on various development projects. This is up from the $1.1 billion it spent in 2009. Also, since costs have come down sharply for rigs and other services, the budget will go further in 2010, allowing the company to drill more.

Offshore Drilling
While the Gulf of Mexico remains weak, some operators are optimistic for the area in 2010. Rowan Companies (NYSE: RDC) reported only 71% utilization here in Q3 2009, but the company said it was seeing a slight increase in activity and predicted that its idle rigs would be working by the end of 2009 or early 2010.

Ensco International (NYSE: ESV) confirmed this view of the market in the Gulf of Mexico and provided further insight on its Q3 conference call. CEO Dan Rabun conceded that the market was weak but added, "Customer inquiries are improving for work starting early next year."

North American Oil Services
Baker Hughes (NYSE: BHI) noted during its conference call that the cycle's trough in North American oil services was Q2 2009, and the company saw an increase in activity in Q3. The company saw revenue increase 3% sequentially in the Q3, and margins moved higher from 2% to 7%.

Increased Drilling May Be Premature
The slow crawl out of the trough of the energy cycle may hit running speed in 2010, as exploration and production companies make plans to increase drilling. The only problem with this enthusiasm is it's being done based on faith in the resumption of normal economic growth, a situation that many believe is far off in the future. (Learn about factors that affect oil prices in our article, What Determines Oil Prices?)

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