Pioneer Drilling Reports Slow Down in Eagle Ford Rig Contracts

Lower commodity prices will lead to lower rig utilization - not neccessarily fewer wells being drilled

Drilling RigPioneer Drilling is forecasting thinner margins and lower utilization of its rig fleet due to falling natural gas and oil prices. Eagle Ford drilling rig utilization is a direct contributor to the suppressed numbers. The company ran an average of more than 13 rigs/week in the Eagle Ford during the second half of 2011, but only 10 rigs were running as of June 22, 2012.

“With the recent declines in oil and natural gas liquids prices, we are seeing some softening of demand in certain markets,” including in the Eagle Ford Shale, said Pioneer CEO William Stacy Locke in a statement.

This shouldn’t set off alarms. Not many (if any) companies planned for $2 natural gas and those that did were hoping for $100/bbl oil. Lower commodity prices mean less cash flow to use in developing plays like the Eagle Ford. The overall U.S. rig count is expected to fall under pressure in the second half of the year if commodity prices don’t recover. [Read more…]