From the Green Jackets:Drilling Industry in Crisis
Rural water lines are spreading like wildfire throughout the countryside. Many reasons are attributed to their growth. Public concern has fueled the cause because some people don't believe their private wells are safe. The most discouraging reason for rural water lines' growth comes from ourselves, those of us in the drilling and pump industries. The majority of contractors are so caught up in beating their competitor's price, they are leaving quality and profitability by the wayside and simply are treading water.
For the domestic well market to survive, we in the drilling industry have to act as businessmen. Our expenses are up. Steel casing has risen by 125 percent in the past 14 months, diesel fuel has risen by 40 percent, and insurance is astronomical. To replace your drilling rig will cost approximately 15 percent more than a year ago, yet we have contractors cutting prices to gain market share.
The inability for the majority of the contractors in business to see their true expenses and lack of profit is the root of our problems. No matter the convention you attend, the number one complaint all contractors have is a lack of quality help. Why don't we have quality help? We don't charge enough for our services to pay good help. Good help is like any other piece of equipment - the more you spend, the better the quality. Many family businesses are finding their sons and daughters want nothing to do with the business because they can't live on $25,000 a year. Drilling firms can't hire management and sales personnel without shelling out $45,000 to $70,000 a year. Yet many contractors feel their only expenses on the job are the casing, bit, pump and tank. Regardless if we charge $5 per foot or $35 per foot, the same number of wells will be drilled. Raw material costs are continuing to rise with no end in sight; the industry has to stop absorbing these expenses and start passing them on to the end users.
When contractors become profitable, many of our problems will have solved themselves. Better quality help will be attainable because we can pay better wages. We can help slow the insurgence of rural water lines because we'll have extra money to educate our customers who don't feel their private wells are safe. We also can hopefully help the NGWA with extra donations to their many programs, such as the Fly-in in Washington, D.C., and other lobbying efforts. With higher profits and a slowed rural water agenda, there will be opportunities for contractors to finally put some money in their pockets and to keep their heads above water.
I hope, as an industry, people will take notice of what is going on around them: There are not many opportunities to diversify in the drilling business. The geothermal market is marginal, at best, for profitability and can't sustain a flood of rotary rigs driving down its pricing structure. The geothermal market already has a number of contractors driving more than half way across the country for less than $5 per foot and paying drillers and hands prevailing wages to boot. Opportunities for cable-tool drills are even fewer, with the exception of well rehabilitation and cleaning.
I would like to see more business-oriented classes offered at more conventions. Many programs and continuing education credits are based on drilling and hands-on-related topics such as grouting, etc. Most of us know the ins and outs of the business very well but are lacking in our business skills. Any person attending a business or expense-tracking class will learn something that can improve their bottom line and make them a sharper businessperson.
We are in a unique business. You can't go to college and learn our trade or apprentice for a few months and know it all. This business takes years of experience, and the education costs far more than any bachelors or masters degree when you figure the number of wells you have drilled twice or equipment that has been torn up during the learning curve. Many of us do not see the value of our services and the expense of our education. We are intimidated to charge accordingly. We run reputable businesses and are on call 24/7 - that service should cost a fair dollar. We have millions of dollars in equipment and thousands in inventory. Our services are as valuable as those of doctors or lawyers; it's time our invoices reflected the need of our product and the cost to obtain it.
There is no reason why a business owner in this industry should not be making six figures a year. Quality drillers and hands should earn $35,000 to $60,000 a year, yet many of us are barely making payments. I urge everyone to sit down and see what your true expenses are. I don't think many will be happy with what they see. Now it's time to take action. Call some of your local competitors and see how they feel about their bottom line. Attend a trade show and visit with your peers in the industry about the prices for which they are drilling. The only way things will change is if we unify as an industry and refuse to drill for practice. If things don't change, we will have to look for a new industry to destroy.