Drilling Oil & Gas Wells
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 1,472 drilling contractors in the US provide drilling services under contract to oil and gas producers. Drilling may be land-based (domestic or global) or conducted in shallow or deep water, and each type requires a unique set of capital equipment. Contracts can be for a single well or multiple wells in a geographic location.
Volatile Energy Prices
Demand for drilling is affected by gas and oil prices, which can be highly volatile.
Dependence on Third Party Suppliers
Demand among drilling companies for consumable supplies, ancillary rig equipment, and third-party services can exceed local supply and result in increased prices and delivery delays.
Industry size & Structure
A typical oil and gas drilling company operates from 1-2 locations and has annual revenues of $11-12 million.
- There are about 1,472 firms providing drilling services in the US that employ 46,000 workers and generate $18 billion in annual revenue.
- 80% of firms employ 20 or fewer workers; 7% of firms have more than 100 employees.
- Large drilling firms include: Transocean Ltd., Seadrill Ltd, Helmerich & Payne, Nabors Industries Ltd, and Noble Corporation.
- Major suppliers are oil and gas service companies, such as SLB (aka Schlumberger), Halliburton, and Baker Hughes. They provide pipe, chemicals, drilling mud (drilling fluid), concrete, waste disposal, etc.
- Buyers of a drilling company's services are oil and gas exploration and production companies, such as Exxon-Mobil, Total SA, BP Oil, Chevron, ConocoPhillips, Shell, Range Resources, etc.
- Entry into the business is difficult because drilling rigs are expensive and require highly experienced crews. Production companies prefer to contract with firms that have a proven track record in both operations and safety since penalties for leaks, spills, and environmental breaches can be severe and can result in lost leases.
Industry Forecast
Drilling Oil & Gas Wells Industry Growth
Recent Developments
Feb 23, 2025 - Producer Prices Plateau
- Producer prices for oil and gas drilling services remained flat in December compared to a year ago after posting a previous flat December-versus-December annual comparison, according to the latest US Bureau of Labor Statistics data. Employment by the industry inched up 0.8% year over year in January, while average wages at oil and gas extraction firms fell 2.4% YoY in December to $43.48 per hour, BLS data show. Longer term, employment by drillers is down significantly from its highs in the mid-2010s as rig counts fall and companies rely more on technology to drive down production costs amid rising wages.
- As of February 14, the total North America rig count stood at 833 (588 rigs in the US and 245 rigs in Canada), according to Baker Hughes' latest North America rotary rig count. The US added two rigs (both on land) week on week, while Canada’s count declined by four rigs over the same period, bringing the total North America rig count to 833 versus 855 a year ago. The US rotary rig count fell by 33 year over year, with the rig count in the Permian Basin falling by eight (304 vs. 312 a year ago). While the rig count has been trending downward in recent years, oil production is at record high levels due advances in technology and improved efficiencies. Moreover, the current consolidation trend amongst exploration and producing companies (E&Ps) has firms optimizing operations and capital budgets, resulting in the falling rig count.
- Energy producing states working to comply with the EPA’s final methane rule, are wondering if their efforts could be moot once President-elect Donald Trump takes office in January, Politico reports. The EPA says the final rule will sharply reduce emissions of methane and other harmful air pollution from oil and natural gas operations — including, for the first time, from existing sources nationwide. That’s if it sticks. New Mexico and North Dakota are among those states trying to manage regulatory changes as Trump prepares to return to the White House. The Biden administration authored three main rules on methane emissions including one that would require operators to pay a $900 fee for every metric ton of methane leaked over a certain percentage starting in 2025. Methane, the largest component of natural gas, is more potent than CO2 and is responsible for approximately one third of current warming resulting from human activities.
- A US District Court has ruled the National Marine Fisheries Service’s (NMFS) biological opinion for oil and gas drilling in the Gulf of Mexico fails to protect an endangered species of whale and sturgeon, Oil & Gas Journal reports. The ruling by the US District Court could imperil federal offshore oil and gas leasing drilling in the Gulf, several energy trade association defendants in the case – Sierra Club v. NMFS – said. The court said it would vacate the biological opinion on Dec. 20, 2024, if NMFS fails to complete a new one. Siding with environmental groups, the court challenged the biological opinion, saying it “underestimated the risk and harms of oil spills to protected species” and its jeopardy analysis for two listed species, the Rice’s whale and the Gulf sturgeon. The next federal Gulf of Mexico oil and gas lease sale is scheduled for 2025.
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