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 1,700 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 for multiple wells in a geographic location.

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 $10-11 million.

    • There are about 1,700 firms providing drilling services in the US that employ 69,000 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 Nobel Corporation.
    • Major suppliers are oil and gas service companies, such as 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 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
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Nov 10, 2022 - Exports Drive Growth in LNG Operating Capacity
                              • Demand from Europe and Asia for US liquified natural gas (LNG) exports will drive triple-digit growth in US annual operating capacity by the end of the decade, CEO of energy infrastructure company Sempra Jeffrey W. Martin told investors in October 2022. “What's interesting is the United States today has [more or less] 70 million tonnes per annum of operating capacity, and we project that over the next eight years that will grow by 130%,” Martin said, adding the nation is fortunate to have adequate or surplus natural gas supplies and an ability to produce about 100 Bcf/d of gas with about 20% earmarked for export, Hart Energy reports. Martin said his forecast “might be a little bit short” owing to potential increased availability. In 2021, the US surpassed Australia in trade and liquefaction capacity, according to recent reports from the Energy Information Administration.
                              • The Baker Hughes rig count report for November 4, 2022 showed the active rig count holding relatively steady. Baker Hughes reported 770 active US drilling rigs, an increase of two rigs from the previous count (October 23) and up 220 from a year ago. The oil rig count was 613 rigs, while the number of gas rigs declined by 1 to 155 (plus 2 rigs classified as miscellaneous). North Dakota added two rigs, while Oklahoma, Texas, and Wyoming each added one. California and Louisiana saw their rig counts dip slightly. Energy firms across the Midcontinent and Rocky Mountain region said they needed a 21% sequential increase in the average natural gas price to warrant a substantial increase in drilling during the third quarter, the Federal Reserve Bank of Kansas City reported last week.
                              • The Biden administration has leased fewer acres for oil-and-gas drilling offshore and on federal land than any other administration in its early stages dating back to the end of World War II, an analysis by The Wall Street Journal shows. The Interior Department, which oversees oil leases, leased 126,228 acres for drilling during Biden’s first 19 months in office, the WSJ analysis found. No other president since Richard Nixon in 1969-70 leased out fewer than 4.4 million acres at this point in a president’s first term. During his presidential campaign, Biden pledged to stop drilling on federal lands. The low number of acres opened for drilling under his administration shows Biden is largely sticking to his promise.
                              • California lawmakers in August 2022 passed a ban on new oil and gas wells near residences, schools, nursing homes, and other so-called “sensitive receptors,” where people could be harmed by oil and gas emissions, according to Inside Climate News. The legislation, Senate Bill 1137, prohibits the California Geologic Energy Management Division from approving a new oil well within 3,200 feet of residential neighborhoods. However, it does not ban existing wells within those areas. The action came after similar efforts to ban fracking and establish a buffer zone failed last year in a state committee vote. The bill, signed by Gov. Gavin Newsom in September, is part of a major climate package that includes a phase-out of gas-powered cars by 2035.
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