What factors influence the Well Service Rig Count?

Rig count trends are predominantly influenced by the operators’ needs to protect and maintain their main assets and cashflow from them, i.e., their wells and the hydrocarbon reservoirs that produce into them. These factors are in turn influenced by the current and near term expected movements of the price of oil and gas. As a result, rig counts significantly reflect the influence of expected future movement of oil and gas prices on current North American producers. Additionally, there are a number of other factors effecting the activity:

Seasonal Spending Patterns

• Various producers have pre-defined spending cycles.
• Activity historically declines in the first quarter in the US.
• In Canada the activity level declines in second quarter due to the spring thaw, known locally as "Spring Breakup".

Weather

• Seasonal weather patterns such as the Canadian spring thaw making the ground soft, make the movement of all heavy equipment very difficult between locations.

Other factors

• Local tax issues
• Availability of capital to producers
• Labor availability - For the first time, this last peak of Well Service Rig activity in early 2001 was limited by personnel shortages that could not be filled.
• The variable volatility of commodity prices between oil and gas will have some influence on the overall activity of the rig count, as seen during the gas peak of late 2000 / early 2001.