Survey Demographics

Hart Energy researchers completed interviews with eight industry participants in the workover/well service segment in the Bakken Shale area. Participants included an oil and gas operator and seven managers with well service companies. Interviews were conducted during mid-November 2014.

Part I. – Survey Findings

Among Survey Participants:

  • QTQ Demand Steady in 4Q14 [See Question 1 on Statistical Review]. Five respondents said that demand for workover rigs remained steady in 4Q14 vs. 3Q14, while three said demand had shrunk QTQ. This was similar to 3Q14 when five respondents said demand remained steady, two said it had shrunk and one said it had increased QTQ. Three respondents acknowledged that oil prices were creating apprehension in the area, while winter weather had already started slowing demand.
    • Anecdotal Information/Quotable: Mid-Tier Well Service Manager: “It's definitely slowing down, but it always slows down this time of year so it’s hard to say if it is due to oil prices or just seasonality. Companies always run out of money this time of year. I think it is a bit worse this year; I have two of our three rigs are not working, so I’d say it's the worse I have seen it in three years.”
  • Number of Rigs Sufficient [See Question 2 on Statistical Review]. Seven respondents said the number of rigs in the Bakken Shale is sufficient to meet demand. However, one said there were idle units and that there was excessive inventory available.
    • Anecdotal Information/Quotable: Mid-Tier Well Service Manager: “There is an oversupply in the Bakken right now.”
  • Workover Rigs Generally Spread Evenly Across Tasks [See Question 3 on Statistical Review]. Among all respondents, standard workovers account for 29% of work, routine maintenance accounts for 29%, plug and abandonment (P&A) work accounts for 19% and completion work accounts for 23% of all work performed, on average.

  • Some Use of Coiled Tubing [See Question 4 on Statistical Review]. Five respondents said they do not use coiled tubing at all, while three said they use it, but for specific jobs only and they have not increased their usage in the last six months.
    • Anecdotal Information/Quotable: Mid-Tier Well Service Manager: “We use it, but not consistently and only for specific applications. But we are not using more of it.”
  • Hourly Rates Consistent Among HP Series [See Question 5 on Statistical Review]. Most of the workover rigs horsepower fall within the range of the 500 series. The 500 HP hourly rates average $425 to $600/hour depending on what ancillary equipment is contracted. See Table I for Average Hourly Rates.
    • Anecdotal Information/Quotable: Mid-Tier Well Service Manager: “I’ve heard that a couple of companies have started lowering prices.”

  • Hourly Rates Flat QTQ [See Question 6 on Statistical Review]: All respondents said that pricing was flat QTQ and there was no anticipation that prices would rise in the next three months. There was concern from three respondents that if rigs started laying down, prices would fall.
    • Anecdotal Information/Quotable: Mid-Tier Well Service Manager:“The lower oil prices are definitely affecting us because there is a surplus of workover rigs already.”
  • Competition Not Affecting Fleet Utilization [See Question 7 on Statistical Review]. All respondents said that competition had not been a problem lately, and that they were not anticipating it would be given oil prices and the weather turning cold again.
    • Anecdotal Information/Quotable: Mid-Tier Operator:“We aren’t seeing more competition.”
  • Some Impact on Rig Utilization from Lower Oil Prices [See Question 8 on Statistical Review]: While five respondents said that the lower oil prices had not impacted demand, three said that the lower prices were affecting rig utilization and therefore would eventually affect pricing if oil prices remained low too long.
  • 2015 Outlook Appears Steady [See Question 9 on Statistical Review]: All respondents said they do not foresee a strong slowdown in 2015, however, none are predicting strong growth either. Most respondents said it is too early to tell about next year’s demand. Two respondents said they are planning for it being flat YTY in 2015, while one said that if oil prices remain this low rigs will start stacking up, which would affect pricing.
    • Anecdotal Information/Quotable: Mid-Tier Well Service Manager:“If prices remain low, we’ll see rigs starting to stack up or move south.”

Part II. – Statistical Review, Workover/Well Services

Total Respondents = 8 [Oil & Gas Operators = 1, Well Service Companies = 7]

1. Do you expect demand for workover rigs to grow, remain the same, or shrink in 4Q14 compared to 3Q14?

Remain the Same: 5

Shrink: 3

2. Would you characterize the supply of rigs in your area as excessive, sufficient, or insufficient to meet the 4Q14 demand?

Excessive: 1

Sufficient: 7

3. Looking at your slate of well service work - on a percentage basis - how much of it is workover vs. routine maintenance vs. plug & abandonment (P&A) vs. completion work?

4. How are coiled tubing (CT) units impacting your company's slate of work? Would you say CT units are getting more, less or the same amount of work that would have gone to work over rigs compared to six months ago?

Same amount: 3

Do not use coiled tubing: 5

5. What size (horsepower) workover rigs do you own? What is a representative rate for this size workover rig in your area? [Rates shown are an average rate among all respondents in the category.]

6. Do you expect workover rig hourly rates to increase, remain the same or decrease over the next 3 months?

Remain the same (0%): 8

7. Have you noticed competitors from other regions entering your area?

No: 8

8. What has been the near-term effect of the drop in oil prices in your area?

No near-term effect, but cautious: 8

9. What do you foresee happening in your area in 2015 if the prices stay down?

Could see rigs stacking up: 1

Predicting flat growth in 2015: 2

Too early to tell: 5