Survey Demographics

Hart Energy researchers completed interviews with eight industry participants in the land drilling segment in areas of the Rocky Mountains outside of the Bakken Shale play. Areas include the DJ Basin (Niobrara), Uinta Basin and Piceance Basin. Participants included three oil and gas operators and five managers with drilling companies. Interviews were conducted in early January 2015.

Part I. – Survey Findings

Among Survey Participants:

  • Rig Demand Weaker QTQ [See Question 1 on Statistical Review]. Demand for land drilling rigs was softer in 1Q15 vs. 4Q14 for seven of the respondents, with most saying that rigs were stacking up in the area due to lower oil prices. One respondent said that demand had remained steady.
    • Anecdotal Information/Quotable: Mid-Tier Driller: “In every area of the country, no one is immune to the effect of these lower oil prices.”
  • Excessive Rig Inventory [See Question 2 on Statistical Review]. There is an excessive amount of rigs in the area according to all respondents. Most said that rigs are stacking up due to softer demand from lower oil prices.
    • Anecdotal Information/Quotable: Mid-Tier Driller: “The rigs that are operating now will keep working but rigs are stacking up here.”
  • Newbuild Orders Slow [See Question 3a and 3b on Statistical Review]. Seven of the respondents said that there is no demand for newbuilds in light of the weaker demand in the area. However, one respondent said that they had planned on having two newbuilds in 2015 and would continue with that plan despite weaker demand. The newbuilds will be 1500 HP with A/C power.
    • Anecdotal Information/Quotable: Mid-Tier Operator: “We are not seeing any newbuilds as I think we are going to continue to see rig counts drop through the year.”
  • Rig Day Rates Down Low Double Digits [See Question 4 on Statistical Review]. The range for rig rates in the Other Rockies area was $27k to $30k for 1500 HP with A/C power. The rates were similar to what respondents quoted mid-year 2014; however, seven of the eight respondents said that rates are being discounted from 10% to 30%. Rig rate averages given by survey participants can be seen in the table below.
    • Anecdotal Information/Quotable: Mid-Tier Driller: “Right now, we are having operators ask us for a 10% reduction to keep our rigs busy, but that percentage would probably be greater as year goes on. The rig count is going to continue to drop. This is for the rigs that will continue to run, the others are stacking up.”
SizeAC PowerSCRMechanical
1000 HP$19.5K$17.5k$16.5K
1200 HP --$23.5k--
1500 HP $23.3k$23.2k$19k
1500 HP newbuild$28k----
  • Rig Rates Down Next Three Months [See Question 5 on Statistical Review]. Seven respondents said that rig day rates had decreased QTQ for an average of 15%. One respondent said that prices had not dropped yet, but that he was expecting to have that conversation any minute now. Two respondents said that rates would continue to drop as much as 40% if oil prices did not begin to rise by mid 2015.
    • Anecdotal Information/Quotable: Mid-Tier Driller: “We are having conversations about drilling, fraccing and completing and those conversations involve at least a 10% reduction in rates.”
  • 2015 Demand Remains Weak [See Question 6 on Statistical Review]. All respondents said that 2015 would be a leaner year than 2014, but one respondent expected that after a rough first quarter demand would level out and improve. Seven respondents said they expect work demand to be lower, with day rates weakening as well if oil prices did not go up soon.
    • Anecdotal Information/Quotable: Mid-Tier Operator: “We're taking our prices down 30% QTQ, but we are also assessing the situation which is dynamic as to what our strategy will be this year.”

Part II. – Statistical Review U. S. Land Drilling – Other Rocky Mountain Areas

Total Respondents = 8 [Oil & Gas Operators = 3, Drilling Companies = 5]

1. Do you expect demand for drilling rigs to grow, remain the same, or shrink in 1Q15 compared to 4Q14?

Remain the Same: 1

Shrink: 7

2. Would you characterize the supply of rigs in your area as excessive, sufficient, or insufficient to meet 2015 demand?

Excessive: 8

3a. In your area, do you expect there will be an influx of newbuild rigs during the next six months?

Yes: 1

No: 7

3b. What size and type of rigs do you expect will come into the market?

1500 HP A/C: 1

Not applicable: 7

4. What are the average rig day rates in your area? Is this rate for an AC Power, Diesel-SCR, or Conventional Mechanical type of rig?

[Rates shown are an average ‘per day’ rate among all respondents in the category.] (k = thousand)

SizeAC PowerSCRMechanical
1000 HP$19.5K$17.5k$16.5K
1200 HP --$23.5k--
1500 HP $23.3k$23.2k$19k
1500 HP newbuild$28k----

5. Do you expect rig day rates to increase, remain the same or decrease over the next three months? By what %?

Remain the Same (0%): 2

Down (average 9%): 6

6. In 2015, what are your expectations for drilling activity if the oil prices continue to be depressed?

Down with day rates dropping more than 30%: 2

Down with day rates dropping 10%: 2

Down with a reduction in day rates: 2

Down in 1Q15, but we’ll be steady and improve: 2