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.
Same thing is happening with idle trucks. Kinda sucks as a truck parts salesman.
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.
North on 22 about 5 miles out of town….
Oh ok thanks man. I mean i see rigs stacked here and there, but not as many as there should be. I’m in Minot though and it seems like companies aren’t leaving very much idle equipment just sitting around here lately. I’m guessing they are taking it out that way instead.
We are stacked high in west Texas (odessa/midland) as well.
All down business 20 and loop 338.
Where is that pic from Tim Collins?
Chris Darden that sucks because I keep hearing that west Texas is one of the only places that are still staying somewhat busy. Apparently your production and extraction costs for wells are lower than we can pull off up here in the Bakken.
I have a pic of the midland hp yard. Noticed that precision is stacked the other day too.
That’s true shane, but we lost another 2 or 3 rigs this week on the rig count
Still cutting jobs. I’ve been out of work since December. Just skating by on the funds I have left.
Yeah I’m not doing flowback work up here anymore in the bakken either lately, and I’m just working at a regular old job now. There are still companies doing some wells near Watford City and Williston, ND but it’s not steady out in the field and lots of shop time and maintenance type stuff for my buddies still doing it. I miss the oilfield and i hope to get back out there once work and oil prices pick up again. I think we’ll need at least $50-$60 /bbl for fracs and flowbacks to get busy again. We have a bunch of drilled wells up here that are just sitting capped and they won’t bother completing them until prices go up. We used to have it setup where companies had to frac and complete a well within 1 year to maintain the lease, but apparently they changed that now. Here is an article about that if you feel like reading about it. Thanks alot for the info and I hope stuff picks up again and you can get back out there. http://www.reuters.com/article/2015/09/14/north-dakota-oil-production-idUSL1N11K12220150914
Shane Mortensen, west Texas has gone crazy with crime and theft since the bust. I was a regional service manager. Now I’m f***ed.
I’m working in Stanley at a Stat disposal, ain’t making the big bucks like I thought but, I’m making a living at least.
It’s only one year for the first well. If the pad is producing the wells can sit indefinitely. That’s why the rigs jumped around so much a few years ago just drilling one or two wells. After that pretty much every company started batch drilling four or more at a time
Yeah that whole drilling and capping, waiting to frac really hurt my job doing wireline…
And It looks like Tim Collins photo is of h&p yard north of Dickinson
Yeah i saw Tim’s comment from earlier. I was too lazy to go read the earlier stuff before i typed that question asking that haha.
Helms you suck you lie and deceive.keep your word. Quit changing things to accommodate the big oil companies.they have ruined our state nothing but crime and inflation.lots of oil and saltwater brine spills. And leaks.much never reported when trucks got paid by the loads and dumped waste all over into water and over the hills when no one was around. So they could hurry up and get another load. Quit your job. .maybe some one who cares about our quality of life will take over.nothing but inflation crime drugs prostitution. Those oil companies bought up opts a d kicked locals out.shame on them .hope they bottom out
Take all the good parts and they will cut them up for junk iron!
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.
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!
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???
H&P?
Unreal.
Odessa yard huh
Hopefully after the election you all will be back to work!!! Hang in there!!!!!
That’s not how oil prices work. Its a global market based on supply and demand.
What a dumb comment. Has nothing to do with a election
You don’t have to be such a jerk about it Craig. She was only trying to help you stay positive.
It didn’t make a difference for the oil booms and bust before. Unfortunately it comes and goes. Seems to leave quicker than it came. Have to save, save, save.
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.
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
Is it greed or jealousy of those that don’t have and feel entitled??
Oil company it’s greed not talking workers
they werent expecting the saudi”s war on fracking in the us , not only did they undercut the price ,but they funnelled money to groups oposed to fracking
I feel da same in scrap iron if would of stayed steady at 180 ton not jump n too 265 now it fell too 90 ton shut n down scrap yards get ready 4 junky neighbor hoods !! Andy Slack at da scrap palace !!!!
Neither of the above –it is market pressure- if we cam sell it we will drill it– if we can’t sell it it won’t be drld
Could of not had 90 rigs going got so many guys working rigs. I am not an oil expert but I knew this would be very short lived. Oil companies wanted that 135 dollar oil. Do you think they cared if companies over expanded themselves that when oil dropped they would not have income to cover payments on new rigs. Not at all think oil companies care that so many people are out of work in oil related jobs nope. See equipment everywhere from trailers to complete rigs. Trucking companies trucks sitting or looking to change the business to freight now. Jobs know one would take in boom people fighting over to just try to save things. Cost of everything out the roof because we are a have got province. Have got debt problems . If had kept drilling at a constant pace this would not be as bad.
Sure no break at pumps so customer still paying to cover cost of all that drilling. Fracking and pipelines to get oil to market.
Feel for all caught in this. Hurts us all. Prayers for better days again.
People want a break at the pump that’s on the Fed’s for not letting more refineries to get built
Still drilling in my neck of the woods
Nabors is only cutting up old conventional rigs. All the new rigs are in stack out yards separated out ready for work.
Where is there a nabors at the one here is shut down
Nabors currently has 23 rigs going in North Dakota. A few up by crosby, williston, Watford City, and Newtown
I have 3 Nabors rigs I take care of in west Texas still
Odessa
Brian Wood
Yup
XT-39 4″ drill pipe is still on back order.
And they blame big oil . Ever hear of the futures market ?
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…
Over off 1-20 or highway 80?
Off I 20 east bound lane day before yesterday
That’s the H&P yard.
Hope shot bottoms up snd our state goes back the way it was.norhing but inflation and crime.and contamination
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
Charles tariffs and taxes are always paid by the consumer
yes but they have been looking to raise taxes to pay for failing infrastructure for years , its going to happen sooner or later , this way we creat jobs in more then one way, and save our own oil and gas industry,
With all the unemployment in Canada Trudeau wants to bring 40,000 Muslims with no security check. JERK!!!!!
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
Use it up
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!
Greed. . Or smart business decisions? Smh
Depends which side your on I guess.
Sounds like smart business.
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 !!
Well maybe putin will straighten out the Saudis by going into Syria and scaring them so they turn off the taps
I don’t remember taking drill pipe to stack out yard. I always hauled it back to the pipe rental yards.