What’s Up in The World of Drill Rigs — Part 2
Much like buying a used car, purchasing a used rig is a viable option for many these days, especially for the driller just starting out or for those who are expanding their business offerings and need an extra rig. With this in mind, we asked some used rig vendors to share their thoughts on the used market and about the trends they see. Interestingly, we found that the economy and affordability still weigh heavily on people’s minds, affecting the used rig business, and technology, we learned, holds an important place in the used market.
When it comes to buying equipment, whether new or used, pricing factors heavily into the equation. Craig Nelson of Nelson Group, Enid, Okla., offers his observations on customers’ tendencies in purchasing equipment, “The trend is, if they absolutely have to buy, and they can afford to buy, they’re buying new instead of used. And if they have a used rig, they’re spending their resources to update it or buy parts and keep it going, like we do with our cars.” The first quarter of this year, perhaps even the latter part of last year, he has noticed people postponing purchase or buying only out of need. Nelson asserts, “I think not only drilling contractors, but all types of contractors in the construction business are somewhat delaying capital expenditures, or they’re not buying unless they absolutely have to. So they’re putting things per se on the back burner or delaying the purchase of capital equipment — a major expense.”
Jerry Sherman, Rotary Drilling Equipment, Olyphant, Pa., agrees that price has an impact. “New equipment gets down to pricing, of course, how much they can actually afford.” About used rig customers, he describes, “Well, they’re like anybody else, they’re looking for the best value they can possibly purchase with liability and backup service.” Explaining used rig customers’ buying habits, Sherman recounts, “Most that use used equipment are fellows who are upgrading from an older piece of equipment and once they buy one from us, the next one normally is a new one. We sell 20 year-old used rigs yet. People still are buying them, but these are people who are just getting going, need a second machine or a backup rig.” Sherman finds, however, that when it comes to selling used vs. new equipment and the profits he sees, “The percentages are just about 40/60 because of the price of new equipment. It sometimes takes us four [used] machines to sell one [new rig]. We sell a new one, take a trade, sell a trade on that trade, and then end up with another trade. You make three or four [used] sales out of one new rig normally anymore.”
Sherman discusses trends in equipment preferences and attributes the changes to technological advancement. “Because of advances in technology,” he states, “what we used to refer to as rotary table-drives, we very very rarely get a request for them. I haven’t had request for one of them in 10 years, probably. In my particular market — and I cover most of the United States when comes to air drilling — on the eastern seaboard, rotary table drives have become a thing of the past. Technology has advanced, people upgrade and that’s what they’re looking to do.”
Craig Higgins of Higgins Rig Co., Hodgenville, Ky., concurs that technology affects the used market as evidenced by what sells better and offers a healthy outlook on its impact. When asked about rig preferences and what trends he sees, he contends, “Some have always been a little less popular than others. Cable tools used to be popular. But rotary came in and became popular, and cable tool became less popular. It’s not a trend, it’s just progress.”
Used rigs are being used in many drilling capacities and on various projects. According to Sherman, “We still have them branching away from water well into environmental and geotechnical,” he shares, and Higgins reveals, “Well, we’re just seeing a mixture of a little bit of everything.”
Despite any other challenges in the field, with low interest rates and a stable home-construction industry, Jerry Sherman predicts good things for the drilling industry and used rig sales: “I still see a steady market.”