Oilfield Cannibals: To Save Cash, US Drillers Strip Idle Rigs

Sales at the National Oilwell's spare parts and repair business, the rig aftermarket division, fell 16 percent to $657 million in the last-reported quarter.

Stacey Locke, chief executive of contract driller Pioneer Energy Services Corp's, said the majority of the 25 rigs the company had divested in the earlier part of the year were sold for parts and pieces to smaller drilling contractors and equipment dealers. His company also keeps some refurbished pieces on standby.

Investors, still seeing an oversupply of rigs, and are encouraging companies to scrap more rigs to halt the slide in daily rental rates, now around $20,000, depending on the rig's speed and power.

"Companies have to continue to scrap idle rigs and do all that they can to balance supply with demand," said Robert Thummel, a portfolio manager at Tortoise Capital Advisors.

However, the scrapping of more rigs would likely increase the number of those ripe for cannibalizing, analysts said.

To escape the downturn gripping the U.S. shale market, Premium Oilfield is expanding in the Middle East.

"Our U.S. domestic customers, the oil producers, are shutting off all capital spending on just about anything," said Hewell, whose Houston company is backed by Houston-based private equity firm Global Energy Capital LP.

(Reporting by Anna Driver and Swetha Gopinath; Editing by Terry Wade and Alan Crosby)


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dozerguy123  |  October 09, 2015
Anderson, since when do oil companies look past there nose? Most OCs dont have the talent to understand what u are stating, although I do agree with u. Used parts suck. You give them to much credit.
Anderson  |  October 09, 2015
Ordinarily you avoid cannibalizing. You are replacing a broken/worn part with a used part with normal labor rates (to remove it, ship it, and reinstall it). Then you have a part that will fail sooner than new. And, you have to replace that part at some point, at normal labor rates. The end result is a lot more labor cost for a part that will not meet new part life expectancy. First sign that a company is cutting its own throat. There are exceptions, but generally this is a bad idea that happens way too often in the oilfield.


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