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Business฀Enviroment
Our฀business฀environment฀and฀its฀corresponding฀operating฀
results฀are฀significantly฀affected฀by฀the฀level฀of฀energy฀industry฀
spending฀for฀the฀exploration฀and฀production฀(“E&P”)฀of฀oil฀
and฀natural฀gas฀reserves.฀An฀indicator฀for฀this฀spending฀is฀the฀
rig฀count฀because฀when฀drilling฀and฀workover฀rigs฀are฀active,฀
many฀of฀the฀products฀and฀services฀provided฀by฀the฀oilfield฀ser-
vices฀industry฀are฀required.฀Our฀products฀and฀services฀are฀used฀
during฀the฀drilling฀and฀workover฀phases,฀during฀the฀comple-
tion฀of฀the฀oil฀and฀natural฀gas฀wells฀and฀during฀actual฀produc-
tion฀of฀the฀hydrocarbons.฀This฀E&P฀spending฀by฀oil฀and฀natural฀
gas฀companies฀is,฀in฀turn,฀influenced฀strongly฀by฀expectations฀
about฀the฀supply฀and฀demand฀for฀oil฀and฀natural฀gas฀products฀
and฀by฀current฀and฀expected฀prices฀for฀both฀oil฀and฀natural฀
gas.฀Rig฀counts,฀therefore,฀generally฀reflect฀the฀relative฀
strength฀and฀stability฀of฀energy฀prices.
Rig฀Counts
We฀have฀been฀providing฀rig฀counts฀to฀the฀public฀since฀
1944.฀We฀gather฀all฀relevant฀data฀through฀our฀field฀service฀
personnel,฀who฀obtain฀the฀necessary฀data฀from฀routine฀visits฀
to฀the฀various฀rigs,฀customers,฀contractors฀or฀other฀outside฀
sources.฀This฀data฀is฀then฀compiled฀and฀distributed฀to฀various฀
wire฀services฀and฀trade฀associations฀and฀is฀published฀on฀our฀
website.฀Rig฀counts฀are฀compiled฀weekly฀for฀the฀U.S.฀and฀Can-
ada฀and฀monthly฀for฀all฀international฀and฀U.S.฀workover฀rigs.฀
Published฀international฀rig฀counts฀do฀not฀include฀rigs฀drilling฀in฀
certain฀locations,฀such฀as฀Russia฀and฀onshore฀China,฀because฀
this฀information฀is฀extremely฀difficult฀to฀obtain.
North฀American฀rigs฀are฀counted฀as฀active฀if,฀on฀the฀day฀the฀
count฀is฀taken,฀the฀well฀being฀drilled฀has฀been฀started,฀drilling฀
has฀not฀been฀completed฀and฀the฀well฀is฀anticipated฀to฀be฀of฀
sufficient฀depth฀to฀be฀a฀potential฀consumer฀of฀our฀drill฀bits.฀
In฀most฀international฀areas,฀rigs฀are฀counted฀as฀active฀if฀drilling฀
operations฀have฀taken฀place฀for฀at฀least฀15฀days฀during฀the฀
month.฀The฀rig฀count฀does฀not฀include฀rigs฀that฀are฀in฀transit฀
from฀one฀location฀to฀another,฀are฀rigging฀up,฀are฀being฀used฀in฀
non-drilling฀activities,฀including฀production฀testing,฀completion฀
and฀workover,฀or฀are฀not฀significant฀consumers฀of฀drill฀bits.฀In฀
some฀active฀international฀areas฀where฀better฀data฀is฀available,฀
a฀weekly฀or฀daily฀average฀of฀active฀rigs฀is฀taken.
Our฀rig฀counts฀are฀summarized฀in฀the฀table฀below฀as฀aver-
ages฀for฀each฀of฀the฀periods฀indicated.
฀ 2004฀ 2003฀ 2002
U.S.฀–฀land฀and฀inland฀waters฀ 1,095฀ 924฀ 717฀
U.S.฀–฀offshore฀ 97฀ 108฀ 113฀
Canada฀ 365฀ 372฀ 263
฀ North฀America฀ 1,557฀ 1,404฀ 1,093
Latin฀America฀ 290฀ 244฀ 214฀
North฀Sea฀ 39฀ 46฀ 52฀
Other฀Europe฀ 31฀ 38฀ 36฀
Africa฀ 49฀ 54฀ 58฀
Middle฀East฀ 230฀ 211฀ 201฀
Asia฀Pacific฀ 197฀ 177฀ 171
฀ Outside฀North฀America฀ 836฀ 770฀ 732
Worldwide฀ 2,393฀ 2,174฀ 1,825
U.S.฀Workover฀Rigs฀ 1,235฀ 1,129฀ 1,010
The฀U.S.฀–฀land฀and฀inland฀waters฀rig฀count฀increased฀
18.5%฀in฀2004฀compared฀with฀2003฀due฀to฀the฀increase฀in฀
drilling฀for฀natural฀gas.฀The฀U.S.฀–฀offshore฀rig฀count฀decreased฀
10.2%฀in฀2004฀compared฀with฀2003฀primarily฀related฀to฀a฀
reduced฀level฀of฀spending฀by฀major฀diversified฀oil฀and฀natural฀
gas฀companies฀who฀have฀continued฀to฀redirect฀a฀portion฀of฀
their฀spending฀towards฀larger฀international฀projects.฀The฀Cana-
dian฀rig฀count฀decreased฀1.9%,฀primarily฀as฀a฀result฀of฀unusu-
ally฀wet฀weather฀in฀the฀summer฀and฀fall฀of฀2004.
Outside฀North฀America,฀the฀rig฀count฀increased฀8.6%฀in฀
2004฀compared฀with฀2003.฀The฀rig฀count฀in฀Latin฀America฀
increased฀18.9%฀in฀2004฀compared฀with฀2003,฀driven฀primar-
ily฀by฀spending฀increases฀in฀Mexico,฀Venezuela฀and฀Argentina.฀
The฀North฀Sea฀rig฀count฀decreased฀15.2%฀in฀2004฀compared฀
with฀2003฀primarily฀driven฀by฀continued฀declines฀in฀drilling฀
activity฀in฀both฀the฀U.K.฀and฀Norwegian฀sectors.฀Increases฀in฀
spending฀in฀the฀North฀Sea฀by฀independent฀oil฀and฀natural฀
gas฀companies฀were฀not฀large฀enough฀to฀offset฀decreases฀in฀
spending฀by฀major฀diversified฀oil฀and฀natural฀gas฀companies,฀
which฀continue฀to฀redirect฀spending฀towards฀other฀larger฀
international฀projects,฀especially฀in฀Russia฀and฀the฀Caspian฀
region.฀The฀rig฀count฀in฀Africa฀declined฀9.3%฀in฀2004฀com-
pared฀with฀2003฀primarily฀due฀to฀project฀delays฀in฀West฀Africa.฀
Activity฀in฀the฀Middle฀East฀continued฀to฀rise฀steadily,฀with฀a฀
9.0%฀increase฀in฀the฀rig฀count฀in฀2004฀compared฀with฀2003.฀
The฀rig฀count฀in฀the฀Asia฀Pacific฀region฀was฀up฀11.3%฀in฀2004฀
compared฀with฀2003฀primarily฀due฀to฀activity฀increases฀in฀
India,฀Indonesia,฀Australia฀and฀offshore฀China.
2004฀Form฀10-K฀฀฀฀฀19