04-HP-876_firstsection.qxd 12/15/04 2:41 PM Page 4 Contract Drilling Operations U.S. Offshore Operations Crude oil prices surged during the last half of 2004, erasing previous records and reaching past $50 per barrel. Additionally, natural gas prices remained resilient in 2004, ev en in the face of record storage inventories heading into the 2004-2005 heating season. In short,  our customers hav not experienced a healthier commodity price  environment in decades. According to statistics compiled by Baker Hughes, average rig activity improv ed world-wide by approximately  13 percent in 2004, with nearly thr ee quarters of the gain coming in the U.S. land market. Almost half of the world’s active rigs are in the U.S. land market, which at year-end had 1,129 active rigs, compared with 967 at the end of 2003. In sharp contrast, the U.S. offshore  market continued to soften and ultimately translated into a significant negative impact on this year's financial results. After 20 years of steady performance, the Company has suffered in recent years through an industr y-wide downturn in activity levels for conventional water depths, wher the majority of the Company’s  offshore platform rigs operate. While this segment appears to have  stabilized, the Company took a $51.5 million non-cash asset impair- ment charge against the carrying v alue of its Gulf of Mexico platform rigs, reflecting our continued expectation that any recovery in this  sector will be slow. The Company r etired one offshore platform rig at