The evolution of drilling

Sept. 26, 2005
Tony Van den Brink is a self-made Canadian businessman, a tool pusher who survived and prospered through many decades in the North American drilling industry.

Tony Van den Brink is a self-made Canadian businessman, a tool pusher who survived and prospered through many decades in the North American drilling industry. Born in The Netherlands, he came to Alberta as a youngster, learned the drilling business, and now observes his industry’s evolution from the rich perspective of experience.

In 1964, Van den Brink bought six used drilling rigs for $750,000; the working rates topped out at $1,000/day. Fiscally responsible, he paid off the rig purchase in only 28 months.

In 1973, he was 45 and had a good look at the market. Only a handful of drilling companies were in business more than 30 years. Helmerich & Payne, Noble Affiliates, and Reading & Bates all diversified. They went into the oil business in order to buoy up their drilling business.

In 1974, Van den Brink bought a company with six rigs, taking advantage of financing made available from the Alberta Opportunity Fund.

In a recent interview with Oil & Gas Journal, he said the structure of contract drilling has changed since those early years of his career. Contracts used to be based on footage (80% or more) and only about 5% turnkey. Contract drillers had to be good drillers to make any money.

Now, he said, 95% of the contracts are day work at $15,000-18,000/day, and client-operators are often involved in the details of drilling, monitoring weight on bit, revolutions per minute, hydraulics, and mud.

Canadian fleet

“Before every slump, there’s a period of overbuilding,” Van den Brink said. In Oklahoma, Van den Brink once bought a 20,000-ft rig for $600,000; it seemed a great bargain. But a year later, he said, he couldn’t have sold it for $300,000. In 1980 he was involved with Cactus Drilling, operating out of Midland, Tex. A year later, seven of the company’s platform rigs were cut up for junk. He said that 90% of Canadian contractors went out of business around this time.

Only a few Canadian drilling companies survived, among them Precision Drilling Corp., Akita Drilling Ltd., and Adco. They carried through, he said, because they had production income or adjunct transportation businesses.

Is the Canadian fleet overbuilt now? Van den Brink thinks it’s properly sized, although he noted that Cambridge Energy Research Associates Inc. believes there’s a glut.

Canadian drilling equipment, he pointed out, is generally in good shape and not corroded, thanks to the low humidity typical of the areas where it works. During past periods of low activity, rigs have been sold piecemeal, some going to the US.

Seasons, safety

The Canadian drilling season developed around the period of ground freeze-up for two reasons:

• Drilling crews were predominantly available after the growing season; many rig hands farmed in the summer. As farmers, they generally had more practical skills (such as welding and fixing machinery) than workers starting out today.

• Winter drilling allowed easier access to areas covered with muskeg.

In the early 1950s, Van den Brink said, drillers and tool pushers working in Canada were often Americans. They acted more like football coaches and knew how to motivate their crews. And working a 16-hr shift was not unusual.

Each rig was a separate profit center, accountable for its own safety record. Safer crews were more successful financially. High turnover had a financial impact; a company paid workman’s compensation on an initial amount of each worker’s salary. If the turnover rate was high, a company paid over and over again.

Now, tool pushers have less control over fewer parameters, and drilling superintendents monitor costs. But new hands receive more training, and lost-time accident rates have plummeted, thanks in part to activities of St. John Ambulance. Van den brink said the working environment is safer too; catheads have been replaced with winches and forklifts, for instance.

The industry’s increased concern for safe operation influences Van den Brink’s thinking on access to Canadian drilling opportunities. He believes, for example, that Canada’s western coast should be reopened for exploratory drilling.

“People have demonstrated they can work safely, and we need the resources,” he said. “So why not do it?”