Drilling Rig Price

Drilling Rig Price

Drilling rigs are essential equipment in the exploration and production industry. The pricing of these rigs can vary greatly depending on their specific functionalities and intended purposes. Choosing the right type of drilling rig is crucial for the efficiency and success of your production process. Make sure to evaluate your production needs thoroughly and select a rig that aligns with your operational requirements.

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Day Rates for Drilling Rigs Stabilizing in Eagle Ford

Overview

The day rates for land drilling rigs in the Eagle Ford region are now becoming more stable. The standard 1,500 HP Tier I AC-VFD rig can cost between $18,500 and $20,000 per day. Although there was a decline in rates by approximately 25% from the fourth quarter of 2014, a small fraction of contractors anticipate further reductions between 10-15%. The prevalent practice has shifted from long-term contracts to well-to-well programs as companies adjust to lower commodity prices.

Baker Hughes reports that the horizontal rig count in Eagle Ford is stable at just over 100 units, roughly half of the peak count from last fall. The utilization rate of regional drilling fleets hovers around 45%, and new insights will be available in the forthcoming land drilling report in September 2015.

Part I – Survey Findings

Key Insights from Survey Participants

• Mixed Rig Demand
  Opinions on demand fluctuated. In March, all participants indicated that demand had decreased quarter-to-quarter (QTQ). By June, opinions were split with four participants stating that demand remained the same QTQ and the other four mentioning it had worsened.
  • Mid-Tier Operator: “We haven’t changed our plans since January. We believe we are nearing the bottom, but not quite there yet.”
• Excess Rig Inventory
  All respondents agree that there is an overabundance of land drilling rigs in Eagle Ford. Some see continued rig decommissioning, while others observe an equal number of rigs being laid down and deployed.
  • Top-Tier Driller: “We are still stacking rigs. We have two more rigs to lay down imminently.”
• 45% Rig Utilization in Eagle Ford
  Utilization rates are approximately between 40-50%, with expectations to stay around the 45% mark until mid-summer.
  • Top-Tier Driller: “We are slightly above 40%, doing marginally better than the market.”
• Rig Day Rates Under Pressure
  Day rates for 1500 HP AC rigs in Eagle Ford range from $18,500 to $20,000. Detailed rates can be found in Table I below.
  • Mid-Tier Operator: “The drilling vendors are hit hard but they might face further challenges.”

• Rig Rates Dropped 3% Quarter-to-Quarter
  Out of eight respondents, two predict a further decline in rates while six expect rates to stabilize. Rates have already decreased by 25% year-over-year, with some variability.
  • Mid-Tier Operator: “Rates have fallen by about 25-30% since the beginning of the year, but we do not foresee further drops.”
• Contracts Remain Intact in Eagle Ford
  Most respondents noted that no contracts are being paid off or canceled in the second quarter, a shift from the previous quarter.
  • Mid-Tier Operator: “While there have been some negotiations, most contracts have remained intact.”
• Movement Towards Well-to-Well Contracts
  Seven out of the eight respondents indicated a shift from long-term contracts to well-to-well agreements.
  • Mid-Tier Operator: “Our contracts vary greatly, with some staying the same, some renegotiated, and others canceled. The terms depend on individual contract clauses and penalties.”

End of Survey Findings

Survey Demographics

The survey involved interviews with eight participants from the land drilling sector in the Eagle Ford area, including five oil and gas operators and three drilling company managers. These interviews were conducted in early June 2015.

Part II – Statistical Review

U.S. Land Drilling – Eagle Ford

Total Respondents = 8
[Oil & Gas Operators = 5, Drilling Companies = 3]

1. Expected Demand for Drilling Rigs in Q2 2015
Remain the Same: 4
Shrink: 4

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2. Supply of Rigs for 2015 Demand
Excessive: 8

3. Estimated Drilling Rig Utilization
40%: 3
45%: 1
50%: 3
Don’t Know: 1
Average Utilization: 45%

4. Average Rig Day Rates
[Rates shown are an average per day rate (in thousands) among all respondents.]

5. Expected Rig Day Rate Changes Over Next Three Months
Remain the Same: 6
Down 10%: 1
Down 15%: 1
Average Down: 3%

6. Contract Cancellations
No cancellations: 8

7. Contractual Market Share
Well-to-Well: 5
Multi-Year Contracts: 1
40% of Eagle Ford on Contract: 1
No Contracts: 1

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End Statistical Survey