Land drillers have been reporting a slow improvement in business over the last few months and seem optimistic about a continued uptick in activity in many markets. The industry is also seeing the shift to oil and liquids development among its customers.
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Rig Count
Baker Hughes (NYSE:BHI) reported that 1,699 rigs were operating in the United States in the week ending February 25, 2011. This was down by 14 from a week earlier, but up 326 from the corresponding week in February 2010.

The Players
Pioneer Drilling (NYSE:PDC) reported fleet utilization of 64% in the fourth quarter of 2010. One indication of how bad things were at the trough is that the company reported only 41% utilization in the final quarter of 2009.

Pioneer Drilling is slightly optimistic on business in the current quarter and expects utilization to average between 66% and 68% in the first quarter of 2011. The company reported during its recent earnings conference call that utilization in February ranged between 66% and 69%.

Nabors Industries Ltd. (NYSE:NBR) is one of the largest land drillers in the United States with a fleet of 550 rigs. The company also has more than 700 workover and well servicing rigs. The company reported a sequential increase in rig years under contract in the fourth quarter of 2010. The management of Nabors Industries has also seen a shift in revenues over the last few years, and now has a majority of its income in the U.S. Drilling division from rigs working in oil and liquid plays.

Key Energy Services (NYSE:KEG) operates a large well servicing rig fleet and recently released its operational update for January 2011. The company reported that its fleet worked 138,425 rig hours during the month, a 5.5% sequential increase from December 2010. However, January 2011 contained an extra day and adjusting for this activity was flat. Key Energy Services reported fleet utilization of 62% in January 2011, up from 60% in December 2010.

Patterson UTI (Nasdaq:PTEN) reported that the company had an average of 209 rigs operating in North America in February 2011. This was slightly higher than the 204 rigs operating in January 2011, and the 196 operating in December 2010.

Customer Migration
The land drillers are following their customer base as they shift to oil bearing basins in the United States. Pioneer Drilling added a West Texas drilling division during the fourth quarter of 2010 to service exploration and production companies that are targeting the Permian Basin. The company has three rigs under lease here so far.

The Bottom Line
The land rig count in the United States and Canada has been slowly rising over the last few quarters and the management teams at these companies believe that this trend will continue in 2011. (For related reading, take a look at How Does Crude Oil Affect Gas Prices?)


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