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And it begins-rig stacking

With oil prices still decreasing, companies in the Permian Basin have begun the process of cold stacking their rigs.

The term “rig stacking” consists of two different methods.  “Cold stacking,” means the releasing or stopped drilling of a rig.  “Warm stacking,” refers to temporarily take a rig off the market.  During “warm stacking” rigs still maintain basic operations and are mostly crewed.

According to CBS 7, an unidentified CEO of an oil operation company explained that many companies have started to consider rig sharing or subleasing their rigs.  Apache, for example, has already stacked 10 of its rigs within the Permian Basin, according to the CEO CBS 7 spoke with.  The CEO also expressed how it is something those working in the oilfields should be concerned about.  When a single rig is stacked, 20 to 50 jobs are at risk, but to minimize job losses companies are already going to their vendors seeking cost reductions.

According to an article by Fuel Fix, Texas drilling permits decreased by 50 percent during the month of November in comparison to October.  The CEO also stated that within the next few months the Permian Basin could see a decrease of more than 75 out of the 500 plus rigs operating in the region.  If this occurs, it will drastically affect the number of jobs in the region.

The CEO continued to explain that there is some good that comes with slowing production.  It will give people the opportunity to regroup and execute the work with more accuracy.  Slowing production will also give the region the chance to work on its infrastructure issues, including housing and roads, which have suffered greatly due to the rapid change in the economy that came with the oil boom.

Offshore operators, where it is more common for rig stacking to occur, are also beginning to stack their rigs due to sliding oil prices.

Chief Executive Officer of Kim Heng Offshore & Marine Holidings Ltd. Thomas Tan commented on the changes occurring in operations:

Six months ago, no one talked about stacking rigs … In the last few weeks, things have become scarier and the talk of stacking started.

Tan explained how over the last few weeks he has received numerous enquiries to stack dozens of rigs.   “A lot of people are looking at warm stack, as they hope that the market will turn around quickly … Cold stack is on their mind… but they haven’t given up hope yet,” said Tan.

Along with Kim Heng, Transocean Ltd, which owns the largest offshore drilling rig fleet in the world, said they, too, may be shutting down rigs.  As of November the company has two ultra-deepwater fleets and one midwater fleet sitting idle.  With market conditions the way they are, if Transocean cannot contract the fleets they will have to cold stack them, which would affect the company’s 2015 cash flow significantly.

The CEO of Seadrill Ltd, the world’s largest driller by market value until recently, said they expect to see a pickup in stacking and scrapping during next year.

Although the declining oil prices have caused companies to take a step back, re-evaluate their spending and close down rigs, the oil prices have allowed for historic mergers and bargain price investments.

Many investors are picking up shares that other investors are dumping in hopes of future stabilization.

James Burgess of Oilprice.com reports, “Industry analysts agree: oil prices are not expected to significantly rebound in 2015, but the oil slump can’t last forever.  The bottom line is that the current market undervalues oil, and therefore, North American oil and gas production is still a safe, long-term bet.”

96 comments

  1. I don’t want this to happen.

  2. This is so dumb. Cuts in oil prices mean less money circulating from these big companies that make and spend a lot of money. 40,000 dollars a day to keep a regular drilling rig up and running. What’s that going to do to the economy?

  3. Why do they say it will give the area time to work in their infrastructure and housing issues? If work slows and jobs are cut why would the area want to work on those issues? So their saying it’s temporary?

  4. Once again profit and greed rule.

  5. No greed, operating cost at today’s rates. Old wells were put in at older lower cost. It will all stabilize at a price per barrel around $75. It is called making money.

  6. I agree with Gillie completely. Especially in the Bakken this will give time to let infrastructure, housing, and pipelines catch up.

  7. I work in the Permian Basin, haven’t heard about any of this with the major companies. Maybe mom and pop drilling companies but not the major ones. My main customers are Nabors, Precision, Patterson, and H&P. Besides land rigs just went up by 3

  8. Not good ……..David J. Bell !!!

  9. Get a job as a Repo Man in any oilfield area…. You will not want for work then…….

  10. My husband works in North Dakota and he said his company just added 4 more rigs.

  11. Hope you kids sacked some cash away.

  12. Another oil boom gone bust at $58.42 per barrel

  13. Don’t worry. When oil goes down, gas prices will come up. Also rigs stack out all the time around the end of the year.

  14. As long as diesel prices stay the same. I don’t see anything changing. Diesel is what ships your food and everything else in our economy. So you know they are still making money as long as trains ships and trucks are moving.

    • Yeah no kidding and rail traffic is ridiculous right now. I load railcars with frack sand and we can’t even get the loaded cars outta here (St Paul MN) due to rail congestion and embargoes

  15. The Williston Brewing Company Is Hiring. Btw the last person out of williston remember to turn out the lights

  16. Last I listened to the news, the world was producing more oil than it used. Yet I have seen no slow down in the Bakken

  17. You know I think I’m gonna delete this website! So negative!

  18. Stackem. High. Find out next year. On your daily Facebook news.

  19. It’s nothing new, just like the 80s. Stopped as fast as it started! !!!!!!

  20. I work for Nabors in Williston area. A couple Nabors rigs have already stacked. Oxy, Hess, and a few others have started stacking rigs. It is a scary time. Just hope the price of crude balances out as it always does.

  21. So I guess I won’t be finding a job anytime soon?

  22. It won’t last come spring time when we are in need of more oil !!!

  23. Mike, I didnt say anythng about working for free! If oil prices drop, their ” “expected” profits arent high enough so they stack the wells as a way to drive consumer prices back up.

  24. Its the end of the year. No need to freak out .. this is our vacatuon time till febuary

  25. This is laughable. At the end of every year things slow down. This is nothing new. People need to quit spraking off about rigs stacking out. Get a clue.

  26. Rigs do stack at the end of the year usually due to budget. This time it’s oil prices and operators can only make millions instead of billions. Been in the patch since 97 and have seen a few slow downs. Low prices and stock market down so investors pull funds. Some rigs keep leases open etc during these times and maintain the field. Hope you on one as well as myself. I don’t have tons saved but I don’t have pickup payments, side by sides fourwheelers and all that other stuff folks go in debt over. Just pay cash.

  27. Started in the patch in 1984 and I am telling you this is no year end as usual this is the real thing. The small oil companies will be forced to sell out to big oil and when rigs want work they will be forced to drastically cut day rates which means lower wages and benefits the will also force all outside entities to cut rates if they want work . End result is 40 dollar oil becomes profitable.

  28. I love this web site you hear the most ignorant people in oil field.

  29. Halliburton slashed salary and benefits in 2012 due to low oil prices. Looking good here in the Utica and Marcellus for the time being.

  30. Just in time for Christmas. Send a big thanks to OPEC

  31. Need to read Oilfield people

  32. If your on the production side in the bakken there is little to worry about

    • Exactly right – while there may be some slowing down with the drilling side of things, the production side will always have work to do and they won’t stack those rigs or slow them down in any way. While winter is a slower time for drilling rigs, it’s a busier time for the production. I can guarantee they won’t be stopping the fracs.

  33. Wow. Not sure if I understood this right but the way I see it is that because people are becoming wiser about their traveling habits and refuse to break the bank for oil, oil companies are going to sit on oil until the supply is higher so they can get more per barrel?

    • No, they have to continually drill and spend to keep supply up. When demand goes down forcing the price down, they can’t afford to pay 2 rigs to drill 2 separate wells in a month. They can only pay 1 rig to do it in 2 months.

    • How? Doing that would force the price up as there is an inverse relationship. Seems to me to be about greed. Why run two at less per barrel when you can run on one and force the price up and sit on the rest.

    • It’s the cost of getting the one up. When prices drop it gets harder to secure loans to drill more. So you drill one well and have it producing while you drill the second to help cover costs.
      When oil is high the well pays for itself quicker allowing the company to hire more rigs thus putting more wells in.

  34. Where are all the idiots who were pissed at Obama because gas prices were too high? Low gas prices mean lots and lots of fewer jobs. Hate to break it to ya’ll, but Obama has been good for the oil patch.

  35. So the big3 oil corporations are gonna let oil get so low to were all of the mom and pops companies will have to shut in because of the cost to maintain and compete. They will end up selling there lease to big oil because they’ve built the infrastructures for pipeline. And then oil will go back to were it was in june of this year.

  36. A lot of companies such as Anadarko, EOG, Noble, Williams, etc, can and will make a shift to natural gas. With new technologies, OPEC is having less effect on what we do. Thank god for the hard work and brilliance of the boys in the patch!

  37. It’ll come back up to the 60 – 80 per bbl range but all the companies that bid at 80 – 100 bbl will be SOL just like Natural Gas did in 09

  38. I heard Oasis already took 10 rigs down. Don’t know if it’s true.

  39. I don’t know about small drillers. But I know first hand that NOV is making a major investment into skids right now. My customer has a order in hand for 16 draw works skids. These are brand new units. One per rig and clearly for land rigs.

  40. Oil is like wheat over produce n the price goes down with the help from the arabs n nobody can operate on negative earnings for long except the govt!

  41. Because Pam. ..our guys feed families and oilfield families never want to see their rig stacked.

  42. just keep buying our frack sand is all I ask!.. North Dakota? #i’dfrackthat 😉

  43. Also remember with the price of fuel going down at he pump people will buy and use more of it. This will lead to and increase in demand so eventually the price of oil will go back up. LIKE!

  44. So the people who say this is “Only and end of the year thing” are the ones who don’t understand the concept of making money and profit margins. Let’s face it they aren’t in this business just to be freinds. When it takes $13 a barrel just to get it to Texas and profit margins are little to nothing, then the move to Texas only makes sense.

  45. The Rag heads are manipulating the market, they dont like us making this much of our own oil, then we arent paying them tons of money to try and kill us with.

  46. OIL is going to ZERO Google it Pal

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