U.S. operated land drilling activity as of June 11, 2010, based on data compiled by Smith International (SII), indicates that the U.S. land rig count is currently 1,442 rigs – up 16 rigs (+1%) w/w. This compares to a 16 rig increase exhibited by the Baker Hughes land rig count and a 21 rig decline for the MI-Swaco rig count. The weekly rig count increase was driven entirely by gas-directed activity, as the gas rig count recovered the 16 rigs dropped last week (current gas rig count is flat with that as of May 28). The oil rig count was surprisingly flat w/w. However, the oil rig count is tracking up 16% q/q vs. the gas rig count up 7% q/q. The horizontal rig count again reached a new peak – 850 rigs (2008 peak = 694). The overall U.S. land rig count is tracking up 10% q/q, with Mid-Caps up 12% and privates up 8%. Since the trough on May 22, 2009, the U.S. land rig count has added an average of 10 rigs/week – outpacing the 1999 rate of 6 rigs/week and the 2002 rate of 4 rigs/week. Since early January, the most active operator has been XTO, adding 21 rigs (+40%), followed by EOG (+39%) and DVN (+38%) – each of which has added 17 rigs since early Jan. COG has witnessed the largest activity decline YTD, dropping 4 rigs (-14%), followed by XOM (-3 rigs or -30%) and COP (-3 rigs or -19%). While the 2010 nat gas strip is up ~22% from May lows, we continue to expect a moderation in gas-directed activity increases and an ongoing shift to oil/liquids rich activity, yielding a flattish U.S. rig count in 2H’10/1H’11. However, we could see a boost in activity resulting from the deepwater GOM drilling moratorium, as independents likely shift capex to shelf and onshore activities.