U.S. oil drilling faces slow recovery, no new highs - Schlumberger

NEW YORK (Reuters) - An eventual recovery in U.S. oil drilling activity after the biggest slump in three decades may never reach last year’s frenzied pace, according to the world’s largest oilfield services company. The drilling recovery will likely to be slower to emerge due to a growing reserve of wells that have been drilled but not yet hydraulically fractured and increased activity in re-fracking wells that are running dry, Schlumberger Ltd Chief Executive Paal Kibsgaard said in a conference call Friday. Schlumberger expects the rebound in U.S. onshore drilling "will be pushed out in time as the inventory of uncompleted wells drilled and the refracturing market expand," Kibsgaard told analysts following the announcement of the company's earnings. The recovery "will fall well short of reaching previous levels." The message suggests that the disconnect between rigs drilling for oil and the trajectory of U.S. production may get worse before it gets better. While U.S. output rose in tandem with the number of rigs in the early years of the shale boom, output has continued climbing even as the rig count collapses to less than half its October peak. The decline in oil rigs slowed this week but left their number at the lowest since 2010, Baker Hughes Inc, another oil services firm, said separately on Friday. Now, fracking a backlog of wells and reviving existing ones could mean that oil production begins to recover even as the number of rigs drilling new wells remains depressed. "There were a number of people still out there who were still expecting a v-shaped recovery," said James Wicklund, managing director of equity research at Credit Suisse. The recovery will instead be shaped like a bathtub, scraping along the bottom, with drilling levels remaining depressed for the coming four to five years, he said. In part, the return to drilling will lag because producers will begin to frack drilled uncompleted wells - wells that have been opened up, but have not yet had the oil extracted from them. "At least 2,700 wells have been identified as candidates for refracture in North America," said James West, an analyst at EvercoreISI. The Eagle Ford likely contains 1,000 of these wells, known as DUCs, according to West's estimate, while the Bakken has about 500, and the Marcellus, Niobrara, and Haynesville each contain over 300 candidates. The market value of these opportunities together is about $5 billion (3 billion pounds), he said. (Reporting By Jessica Resnick-Ault; Editing by Christian Plumb)