Home / News / Bakken News / Cannibalizing the oilfield: Idle rigs scavenged for parts
Stacked rigs are seen along with other idled oil drilling equipment at a depot in Dickinson, North Dakota June 26, 2015. Since November, the Saudi Arabian-led OPEC cartel has held to a policy of unconstrained output, an approach many suspect is designed to flood global markets with more crude, push prices lower and punish rivals, including North Dakota, the second-largest U.S. oil producer. Picture taken June 26, 2015. REUTERS/Andrew Cullen

Cannibalizing the oilfield: Idle rigs scavenged for parts

In the ongoing effort to save money amidst the oil price slump, rig owners have taken to “cannibalizing” parts like motors and drill pipe from stacked rigs, according to Reuters.

To make repairs on the 800 some drilling rigs active in the U.S., equipment is being scavenged from the 1,100 rigs which were idled due to the price crash. The practice has become so widespread during this downturn that services companies and others are saying that even if prices were to make a significant rebound, it would be over six months before drilling and production would increase, an idea which has quelled concerns about another surge of activity driving prices down again.

As reported by Reuters, in a stable and high oil price environment, spare and replacement parts are typically purchased new from companies such as National Oilwell Varco (NOV) and Premium Oilfield Technologies, a small operation which makes equipment and spare parts for drilling rigs active in North Dakota to Texas.

NOV said there are currently enough rigs stacked that drill pipe could be cannibalized for up to a year before needing to place new orders. An oilfield services analyst told Reuters, “[Cannibalization] will slow the industry’s ability to ramp the rig count back up so it will delay the production response from oil prices.”

Although there is no hard data for the extent of cannibalization, the practice has become so commonplace that experts say there is a high possibility that the majority of the 1,100 inactive rigs have already been harvested for parts. Spare parts from idled drilling rigs have become so readily available due to an almost 15-year record high before oil prices began to plummet.

NOV Senior Vice President of Technology and Product Development Grant Almond told Reuters, “Cannibalizing is not an uncommon practice in the industry, and more so on land than offshore, but it has gone up in the downturn because more rigs are being retired or idled now.” Most parts are indeed coming from onshore rigs, however, offshore driller Noble Corp, for example, recently used a helipad and the floor from a worker’s cabin from a rig scheduled to be decommissioned and repurposed the parts to improve a rig being used by Hess Corp.

Meanwhile, investors have been urging companies to harvest more parts from more rigs to slow the decline of drilling rig daily rental rates. A portfolio manager from Tortoise Capital Advisors told Reuters, “Companies have to continue to scrap idle rigs and do all that they can to balance supply with demand.” Although a rebound in orders for new replacement parts is anticipated to follow an uptick in drilling activity, some services providers have taken their business overseas to escape the currently tumultuous U.S. shale markets. To read the full article, click here.

73 comments

  1. Same thing is happening with idle trucks. Kinda sucks as a truck parts salesman.

  2. Damn i haven’t been down to Dickinson since the downturn started but i was kinda wondering where they were putting a lot of the stacked rigs.

  3. Take all the good parts and they will cut them up for junk iron!

  4. Bear in mind for the most part the iron is all ‘new built’ in the last 7 yrs– there i damn little junk iron —
    Cannibalize- scavenge parts from rigs not drlg for other rigs not drlg–?
    That little exercise won’t last long–

    • Thad…. I’ve always enjoyed your intelligent points.

      Im thinking that the motivation is trying to limit expense so that the companies could look better on the year end shareholders reports. What are your thoughts on this?
      I see a lot of this type of activity specifically for that purpose here in my area of the oil field.

    • By nature drlg contractors are anti- scrapping– market pressure is what sorts the iron- The industry is past that point with rig utilization so low.. And in tight times share holder will want to hold on to every penny— they see the scrap value and wonder what the later replacement will cost– all that is left is scrapping for tax write off.

  5. Last string of new drill pipe I purchased was priced as if it were diamond entrenched gold! So they should still be swimming in the profits made during the last boom!

  6. The HP rig I do solids control on Is heading there in probably 9 days….. average well 21,000 + footage in 13.8 to 15 day wells…. it’s hood turn around day rate pricing the problem???

  7. Hopefully after the election you all will be back to work!!! Hang in there!!!!!

  8. Maybe if it didnt go hog wild an wreck the land more people would be for drillin. They should have capped the number of drillin rigs similar to montana. So we could keep a grip on our state.

  9. Oil companies are greedy and started to many companies building rigs to keep up to their demands. Should kept 40 rigs in our area going steady for years as get 90 going for 2 then not drill anymore. Again greed kills workers, oil companies still pumping out of ground like crazy

  10. Nabors is only cutting up old conventional rigs. All the new rigs are in stack out yards separated out ready for work.

  11. XT-39 4″ drill pipe is still on back order.

  12. And they blame big oil . Ever hear of the futures market ?

  13. The thing about West Texas is yes we still have 220 rigs operating but when a year and a half ago we had 620 that’s 400 rigs stacked lots and lots of guys fighting for work out this way plus the housing market is still through the roof…

  14. Off I 20 east bound lane day before yesterday

  15. Hope shot bottoms up snd our state goes back the way it was.norhing but inflation and crime.and contamination

  16. well does that mean that new steel mill in pennsylvania will close? ALL the states are screaming for money for failing infrastrure, why not a tax on imported oil? jobs in energy ,+ jobs building roads and bridges

  17. With all the unemployment in Canada Trudeau wants to bring 40,000 Muslims with no security check. JERK!!!!!

  18. What a shame lots of good men out of work there lots of iron stacked not only rigs equipment in general some thing got to happen

  19. The sad part about these stacked rigs is that some are still being paid for or the contracts got bought out. Either way, the drilling company took the money and laid the hands off when they could have paid them clean up and do maintenance on the rigs for another 6 months to a year. Damn greed!

  20. I live in Alberta and fort Mack is like a grave yard. Our economy is done! No work whatsoever! Harper and Obama finnaly messed it all up !!

  21. Well maybe putin will straighten out the Saudis by going into Syria and scaring them so they turn off the taps

  22. I don’t remember taking drill pipe to stack out yard. I always hauled it back to the pipe rental yards.

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