US land drillers hold inventory of 316 stacked rigs

Jan. 1, 2001
The biggest US drilling contractors could increase the number of land rigs working in the Lower 48 states "pretty dramatically" simply by activating some 300 stacked units, said Gene Isenberg, chairman and CEO of Nabors Industries Inc., Houston, at the October annual meeting of the Independent Petroleum Association of America in San Antonio.
These rigs have been stacked in Nabors Industries Inc.'s Enid, Okla., yard since the early 1980s. Nabors plans to upgrade and modernize much of its nonworking inventory if market conditions dictate (Fig. 1). Photo courtesy of Nabors.
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The biggest US drilling contractors could increase the number of land rigs working in the Lower 48 states "pretty dramatically" simply by activating some 300 stacked units, said Gene Isenberg, chairman and CEO of Nabors Industries Inc., Houston, at the October annual meeting of the Independent Petroleum Association of America in San Antonio.

"There are a lot more [stacked] rigs available than most people think," he said. Those idle rigs could significantly boost domestic drilling activity "without getting into new builds and the burdensome economics of paying for them."

Stacked inventory

Isenberg
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The six biggest land drilling contractors have more than 300 rigs stacked, representing the full spectrum of land rigs that could be brought back into the US market at comparatively low costs. Those companies include Nabors; Patterson Drilling Co., Snyder, Tex.; UTI Energy Corp., Houston; Grey Wolf Inc., Houston; Helmerich & Payne International Drilling Corp. (H&P), Tulsa; and Unit Drilling Co., Tulsa.

"Even a major capital cost program [for refurbishing and activating a stacked rig] is maybe 40% of what it would cost to bring out a new rig," said Isenberg. "We hope we can forestall the building of new rigs that would drive up day rates. Not that day rates won't go up, but not as rapidly as they would otherwise."

The combined fleets of those top six contractors represent 60% of all the land rigs working in the Lower 48 states, including "all of the deeper rigs and certainly all of the stacked rigs," Isenberg said.

As the largest land drilling contractor, Nabors has the most stacked rigs (193), compared to the 190 it now has working. The company is prepared to bring those rigs back into the market "at an accelerated rate," said Isenberg.

The number of idle land rigs held by other contractors available for market as of Oct. 10, he said, included: Grey Wolf, 36; UTI, 35; Patterson, 30; Unit, 6; and H&P, 16, including 12 new-built rigs scheduled through second quarter 2002.

While Nabors commands about 20% of the current land rig market in the Lower 48 states, "we have 60-65% of the incremental rigs," said Isenberg. "I can't say we planned this, but we did anticipate that there would be an increase in the demand for rigs."

When necessary, Nabors plans to upgrade and modernize stacked rigs. The contract drilling industry marked a "recent high in land rigs" on Dec. 1 with 941 land rigs among the 1,090 total rigs working in the US.

That compares to the previous high on Dec. 19, 1997, when 911 land rigs were included in a total count of 1,042 rigs. The bottom came Apr. 23, 1999, with 393 land rigs among the 489 total working in the US.

"I wouldn't be at all surprised to see our aggregate rig count go to 1,300 in the next 2 to 3 years. And I don't think that's going to be the end of the world," Isenberg said.

The real constraint

Finding crews for those additional rigs is "clearly the crucial question," said Isenberg. He acknowledged particularly that "management skills are not readily available."

He is confident that the industry can find the necessary manpower, albeit at higher costs. The average wage level among Nabors rig crews is up about 30% in recent months.

Isenberg also acknowledged the increased emphasis on safety among clients and within the drilling industry itself.

"Getting a zero-accident record is no accident," he said. "Safety emphasis has to come from the top down, and we have fired guys who didn't buy into our safety program quickly. But this is a dangerous business. And if someone works for us, we have the obligation to send him home safely at the end of the day."

Safety and overall work efficiency improve when rigs are under longer contracts for the same client, Isenberg said.