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 1,545 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 $11-12 million.
- There are about 1,545 firms providing drilling services in the US that employ 63,560 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
Apr 23, 2024 - Prices Flat Amid Rising Labor Costs
- The Producer Price Index for oil and gas well drilling services was relatively flat in March compared to a year ago (down 0.3%) after rising 9.2% in the previous annual comparison, according to the latest US Bureau of Labor Statistics data. Meanwhile, employment by oil and gas extraction firms surged 20% in January compared to a year ago, while average wages rose 3.9% over the same period to $44.17 per hour, down slightly from their peak in December, per the BLS.
- Early forecasts for an “extremely active” Atlantic hurricane season could threaten offshore oil and natural gas production in the Gulf of Mexico, according to a new report from researchers at Colorado State University (CSU) released in April. The CSU report forecasts 23 named storms, including 11 hurricanes — five of them potentially reaching major status, meaning Category 3 or higher. In a typical season, there are 14 named storms with seven hurricanes, three of them major. The CSU team said that warm ocean waters serve as the fuel source for hurricanes. CSU's forecast follows a report released in March by US meteorology firm AccuWeather that also predicted an active hurricane season. NOAA will issue its first seasonal hurricane report in late May. Even the threat of a major storm can disrupt oil and natural gas production because companies must evacuate US Gulf platforms as a precaution.
- Rivals Diamondback Energy and Endeavor Energy Resources have agreed to merge as higher oil prices and the accelerating land grab in the Permian Basin spur consolidation in the energy sector, The Wall Street Journal reports. Diamondback beat out other suitors, including ConocoPhillips, in striking a $26-billion deal for Endeavor, according to WSJ. The merger follows deals by oil giants Exxon Mobil (for Pioneer Natural Resources) and Chevron (Hess) reached late last year which ignited a flurry of activity in the sector. Diamondback’s tie-up with Endeavor will elevate the combined company to top-tier status in the US's largest oil patch, with crude production likely eclipsing 400,000 barrels per day, per WSJ. 2023 was a big year for mergers and acquisitions in the oil and gas industry with more than $250 billion worth of deals struck, according to analysts, the highest annual total since 2014, according to Investor’s Business Daily.
- Hydrogen produced by natural processes in the Earth’s crust has the potential to fuel a green energy revolution, The Wall Street Journal reports. The resulting hydrogen gas – so-called geologic hydrogen – can be extracted by traditional drilling methods. Drilling firms and geologists say they’ve found underground hydrogen coming from old gas wells, seeping from unusual circular surface features known as “fairy circles,” and percolating from mid-ocean ridges, reports WSJ. Colorado-based Natural Hydrogen Energy LLC is drilling for natural hydrogen at a well in Nebraska. Hydrogen is potentially valuable as a clean fuel because hydrogen combustion produces only heat and water, unlike fossil fuels that produce greenhouse gases, according to the Department of Energy. Underground hydrogen “is a cheap, clean, abundant resource that is a game changer for the global economy and for climate change,” says Michael Webber, professor of energy resources at the University of Texas.
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