What’s Up in the World of Drill Rigs — Part 4
Interestingly, amid these discussions also emerge manufacturers’ observations on the drilling industry at large.
As often the case with large investments, the high cost of a brand new rig influences if contractors choose to go with a new or used rig.
“The majority of the market, and I know this for a fact, is concerned with price,” Mike Henahan of Foremost Industries asserts. “There aren’t too many people who actually are buying new pieces of equipment when you look at the market as a whole. So obviously the biggest factor is price, on average.”
Granted, not all manufacturers have seen price as the greatest issue for buyers. Lee Lovell of Taylor Rigs has found that price is no longer the limiting factor; instead, customization specific to the customer’s need determines whether or not they buy. “It used to be price,” he shares, “but I would say it’s not price anymore. They look at a rig that fits the need that they have for drilling. We’ve developed a line of customized rigs that we customize to a customer’s need, and this has gone over very well.”
In his experience with contractors who do large-diameter and other types of drilling, their requiring specialized equipment tailored to specific needs is a significant change from the practices of the past. “A few years ago,” he notes, “the customer would look for a rig that was close to what his needs were, but I don’t think they’re doing that anymore. They’re in a position where they’re demanding what they want.” Lovell attributes this change to the consolidation of companies — their growth enables them to be selective about the rigs they purchase.
Henahan, however, doesn’t dispute the need for customization; he agrees that new rig customers seek well outfitted rigs but finds price factors more heavily into their decision to buy.
When contractors do buy a rig, they fall into one of two types of buyers, Henahan explains, and how they envision their companies affects their decision to buy new or used. “I can see people putting a business case together for why they need a piece of equipment,” he states. “Most of them who are buying new equipment, their plan is a growth plan. They’re looking to add rigs, add territory and they’re thinking like a growing business vs. other companies that are very comfortable working on the rigs themselves, working close to home and being home for dinner every night. Those are two very different types of buyers. The former is concerned about productivity and reliability and having some kind of competitive edge — in terms of being able to drill something that someone else can’t.”
The latter group, he goes on to say, does not plan to grow their businesses in the same way. Because they won’t have the cash flow for a new piece of equipment, their concern primarily is getting a good used rig at a reasonable price.
This distinction is significant to manufacturers that are selling new rigs. “All of us manufacturers are competing for that former group that’s looking to grow, looking to expand,” Henahan shares.
So, what are contractors — when they do purchase new — looking for in a rig?
According to Schramm Inc.’s Frank Gabriel, most water well drilling contractors are looking for improved efficiency, labor-saving devices and a faster, less labor-intensive process, and to meet those needs, lighter-weight, more mobile equipment is required. Because contractors aren’t getting more money per well, they need to be able to drill more wells, faster. As a result, the great, big rigs for water well drilling have fallen out of favor, being replaced by lighter, more productive equipment.
Bigger air compressors and larger hydraulic mud pumps on smaller trucks are other trends he cites, as is greater horsepower. More road worthy trucks also enable better highway driving, allowing contractors to get from site A to site B more quickly — important when making more hole means making more money.
Efficiency isn’t the only thing considered, though; appearances matter, too. “When they buy a new rig, they want chrome wheels, they want chrome stacks, they want custom paint jobs,” Henahan says, describing a practice that stands in marked contrast to those who buy used and don’t customize the rigs they buy to the same extent.
“When they are willing to spend big money for a new rig, they really like to get it decked out,” he summarizes.
World events, such as September 11th and the war with Iraq, have caused quiet periods, and a decrease in calls during these times was noticed. But, as manufacturers point out, contractors’ abilities to do their jobs depend on their equipment. If their equipment is broken or worn out and needs replacing, or if they require another rig to keep up with project demands, they find ways to make it happen.
So contractors still are buying, despite the economy and despite the cost of new rigs. Before contractors invest in a rig, however, they first decide with which manufacturer they’re going to do business.
In the past, people would identify with a particular manufacturer and only deal with that one, a behavior that now is changing. Although certain geologies require specific types of drilling, which may in some cases promote brand loyalty, today contractors are becoming more aware that other manufacturers — and other methods, for that matter — are available.
The trade show system across the United States and Canada, with numerous manufacturers displaying rigs, has contributed to an increasing awareness of available equipment and drilling methods. The growth of shows, especially the South Atlantic Well Drillers’ Jubilee and the National Ground Water Expo, has enabled product comparison and encouraged the industry to shop around.
The next generation of contractors also is approaching things a little differently than its predecessors, impacting which manufacturers it chooses to patronize. “People are starting to look around,” Henahan explains. “You’re getting to a situation where a lot of the businesses are getting handed over from the previous generation to the next generation. The next generation may have a more formal education, a broader view of things, and they also may want to make their own mark. They want to be successful like their parents but they’re willing to look around.” Instead of using a manufacturer they have in the past, just because they always have, these contractors select the manufacturer and rig that best meets their needs.
As the industry continues to develop by exploring new options and drilling more efficiently with better equipment, an end result may be increased competition and more work being done by fewer contractors. That’s not to say, however, progress isn’t a good thing; improvements to methods and equipment simply may mean some consolidation down the road. Projecting into the future 40 or 50 years, it’s conceivable the industry might even see the development of a drilling franchise system.
“If I was going to predict something 50 years from now,” Henahan offers, “I would say that there may be people who whether nationally or regionally try to set up either franchise systems or a network of drillers under the same banner.”
The benefit of such a system would be that it would enable drillers who love to drill to focus on that aspect of their business and less so on infrastructure. Because a franchise or an established network would provide standardized methods such as pricing structures, customer service protocols and marketing tools, it could be the perfect set-up for someone less interested in the administrative side of things. “It may appeal to those people who really love to drill,” Henahan reveals. “For those guys, this may be something that would give them an edge and let them do what they like to do.”
With thousands of family-operated contracting businesses still running strong, with succession plans firmly in place, such an evolution is a long way off. Yet, at some point, a foresighted contractor might get the ball rolling and initiate what would be a substantial change to the industry.
The Sonic AlternativeAs the industry’s willingness to branch out and try different manufacturers increases, new technologies and new drilling methods are likely to be introduced as well.
High frequency, rotary-vibratory drilling, now offered by Sonic Drill Corp., is an example of a relatively new technology on the market. In the sonic drill, vibrations have been added to a rotary motion. Three combined forces — the drill bit on this rig physically vibrates up and down in addition to being pushed down and rotated — enable drilling in most geologic formations, and the result is a drill that is capable of high drilling speeds and well suited for difficult tasks such as continuous coring.
Although currently it is most often used in environmental investigations, according to Sonic Drill Corp. president Ray Roussy, contractors interested in reaping the benefits of this technology “can use this machine for just about any field of drilling.” Its applications include geological explorations and geotechnical investigations as well as many others. “We would like to see the machines used in the water well market,” he reveals, “because it can speed up drilling operations.”
No doubt, drilling contractors of all kinds will take advantage of this technology and other advancements like it that will follow, especially as the industry continues to implement and embrace change.