04-HP-876_newMDA.qxd 12/15/04 3:04 PM Page 34 35 The Company’s U.S. land rig operating profit increased 101.0 percent from 2003 to 2004. This increase was due to improved rig utilization experienced by the Company, the incr eased number of rigs available  during 2004, and the improvement in average rig margins per rig day during the year. The improved margins were a result of slightly increased average dayrates and lower expenses per rig day experienced during 2004. The lower expense per day in 2004 was due to the elimination of excess crew overages that occurred in 2003 in connection with placing 19 new rigs into service. During the fourth quarter of 2004, the Company began to experience a mor e significant improvement in rev- enue and margin per day due to higher levels of U.S. land rig activity. Although it is difficult to predict the extent of continued improvement, it is anticipated that rig activity will continue to improve as long as crude oil and natural gas prices remain at the historically high levels experienced during the second half of 2004. Total number of rigs owned at the end of 2004 as compar ed to 2003 increased by a net of four rigs, resulting from five additional FlexRigs being completed  during the year and removing from service one older conventional rig. As a result of the new rigs put in ser vice, and a full year of depreciation of rigs put in service during 2003, total U.S. land rig depreciation increased 26.4 percent from 2003 to 2004. It is anticipated that  depreciation will increase during 2005, but at a much lower rate than  in 2004.