What Are The Factors Will You Consider For Choosing A ...

In the mineral exploration drilling business, drilling rigs and equipment are critical to winning bids, completing contracts, and making money. Buying a new rig is a big decision, and many variables and factors can influence that decision. The biggest question one must answer is, "Will this rig make money? Or will it cost more than other options that can achieve the same goals for less?"

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During the recent market downturn, many rigs have been sitting idle, which has made it easier to remove and install parts to keep the rig running actively. Most rigs were repairing the rigs they had to continue drilling without investing in new rigs and technology. Now that the market is growing slowly, many drilling contractors are deciding whether they should rebuild idle rigs or buy new ones.

Operations managers know which components (engines, valves, assemblies, etc.) need to be replaced, and they usually have a fairly accurate idea of the cost of rebuilding the iconic rigs in their fleet. If the rebuild cost is close to the cost of buying a new rig, they may choose to conduct a full audit to inspect each rig, evaluate the inventory of spare parts, and check maintenance records to get more accurate information to compare the cost of getting the rig ready to work again.

 Drilling Rig

1. Resources

In addition to cost, other factors include whether the drilling company has the time, talent, and capacity to overhaul a rig that is idle and needs work. Overhauls can take three to four months and require facilities, tools, a labor pool of mechanics (who may already be working on other rigs to keep them running), and a contract for the knowledge to get the rig ready to drill.

2. Availability

As the market improves, everyone can expect longer lead times - whether you are rebuilding or buying new. When the market is down or very low, inventories increase, plants are not busy building new rigs, and lead times are reduced. As the market improves and contracts increase, inventories decrease, plants are busy building more rigs, and lead times tend to increase. Ultimately, lead times vary from drilling rig manufacturer to manufacturer.

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3. New Technology

If you have an older fleet of rigs, buying a new one gives you the opportunity to drill more meters more efficiently. Newer rigs are typically more efficient, have more reliable uptime, and have more built-in safety features than older rigs. As mine safety requirements increase, newer rigs can meet new safety requirements that older rigs may not be rated and allow drilling contractors to be awarded contracts.

4. Self-sustaining rod handling equipment

Rigs with rod handling equipment typically have fewer hand and back injuries to the crew, as well as less overall stress and strain. Mechanized rod handling also saves on labor costs and staffing, as no additional staff is required to manually handle the rod. In addition, as drilling service providers with newer equipment with rod handling capabilities are widely known in the marketplace, you may be invited to bid on more. When rod handling is first introduced, productivity suffers because machine rod handling is not as fast as manual rod handling. However, productivity can be maintained with newer technology.

5. Reliability

Used rigs are usually more prone to breakdowns than new rigs, and downtime can affect hard-won drilling contracts. Costs can add up quickly due to lost productivity, rig uptime contractual obligations, and repair of the rig. A well-maintained drilling fleet in a good operating condition not only helps improve productivity but also prevents contractors from being fired from contracts or sites.

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What do you look for in a drill rig? Do you choose a rig because of its capabilities to drill the majority of your business, or do you choose a rig that is capable of working outside your core scope of business? Do you look for new technology or stick with what has worked for the last 30 years? It is important to consider safety, ease of use and reliability. All three factors complement each other. Reliable equipment that is easy to use increases safety, when used within manufacturer recommended limits and operated correctly. Choosing the right rig for your business is no different from choosing the right tool for any job. You can easily install a drywall nail with a six-pound sledgehammer, but at what amount of risk? The same scenario goes for trying to break cement with a nine-ounce drywall hammer. The job can be completed, but how much time will it take?

Three questions need to be answered when investing in new equipment:

1. What type of drilling job consumes 85 percent of my business time?
2. What kind of geology will be encountered more than 85 percent of the time?
3. Where does 85 percent of my business take place?

The first question to be answered is, what is 85 percent of my business? The rig required to do 85 percent of your business will be more productive than purchasing a rig that is designed for specialty projects. Sure, a big rig can drill any size hole. But at what cost? The next question is, what kind of geology will be encountered more than 85 percent of the time? Mud rotary is productive in high water table areas with consolidated and unconsolidated formations. Dense formations with low water table or fractured zones are more suited for air rotary. The downside to a smaller rig is the air compressor capabilities. A downhole hammer is invaluable in hard formation, especially when several hundred feet of hard formation will be drilled. The last question is, in what type of location does 85 percent of my business take place? Do you drill in the middle of fields, housing developments or urban areas? An ideal rig can be on and off location in less than an hour. The bigger the job, the more move in and out time is needed. However, the bigger the job, the more likely there will be a road built for access. Once all three of these questions are answered, it is time to choose the right rig for your business.

Making that Big Rig Decision

To help shed light on that decision process, I interviewed a colleague and good friend, Mike Epley. He has sold rigs in the Texas and the western United States for the past nine years. Texas is one of the most diverse states when it comes to geology, drilling conditions and types of drilling jobs.
 

Q. How do you help your customers with rig selection?

A. It depends on what the customer needs for their business. Are they replacing a rig or expanding their business? What is the scope of work that the rig is required to do?
 

Q. What type of rig seems to be most popular, air or mud?

A. Again, it depends on the required scope of work. In Texas, east of Interstate 35 and south is predominantly mud. Southwest and central Texas are &#;Big Air.&#; The rest of the state requires the use of mud and air as required.

Q. Let&#;s talk about the scope of work. What type of work do your customers do?

A. Many companies drill residential water wells. I am seeing a lot of diversifying to capture more work than just residential.

Q. Do they use the same rig for residential and municipal water wells?

A. No. Sure, I have customers that use their residential rigs to drill some municipal wells. But the companies that are focused on drilling large-diameter municipal wells day in and day out have 50,000-pound capacity or bigger rigs set up just for that work.

Q. How are your companies diversifying outside of water well drilling?

A. Geothermal and cathodic drilling are very popular. I have always had customers drilling these types of boreholes. A good residential drill rig can easily be set up to drill other types of boreholes.

Q. How long have you had customers drilling cathodic holes?

A. Cathodic has been around a long time. The past five years the work has increased quite a bit.

Q. Now that the oil and gas work has slowed down, did cathodic drilling slow down?

A. No. Installing cathodic protection on new and old pipelines is mandatory. I believe there are 5,000 new holes to be drilled in Texas this year.

Q. What&#;s the difference between cathodic and geothermal drilling?

A. The borehole size is larger but not outside what the rig is capable of. Geothermal drills 4.25- to 6.5&#;inch diameter holes to a depth of 400 to 500 feet. Cathodic drills an 8- to 10-inch hole to 500 feet. Once the borehole is drilled, both geothermal and cathodic require special equipment for product installation and pumping grout material down the hole.

Q. So companies drill the borehole for cathodic and install the product?

A. I have a several customers set up to do the entire job from start to finish. It is very similar to large ground source geothermal projects. In the beginning, drillers would just set the loop and grout. Now many companies want to do the whole project from start to finish.

Q. Tell me about the rig purchase process.

A. In the last couple years, a majority of drill rigs have been financed.

Q. Through local banks or big banks?

A. In the past, many of my customer&#;s used local banks to do the financing. Lately, large equipment financiers have been competitive &#; such as DLL and Wells Fargo.

Q. What advice would you give to a new water well drilling company starting up this year?

A. Work with your salesman. Make sure your expectations of the rig align with the manufacturer&#;s product specifications and capacity. It is important to purchase a rig that can be productive in your operating area. Take a good look at your scope of work and break down the operating costs. A good rig can&#;t be all things to all jobs. Choose the rig that fits best for your company.

Readers with more questions can contact Mike Epley, GEFCO Southwest territory sales manager, at .

Final Thoughts

It all comes down to using the right tool for the right application. A rig capable of drilling 1,000 feet and setting large casing could be set up to drill a 100-foot hole, but at what operating cost? Big rigs require more horsepower and consume more gallons of fuel per hour. The same could be said for a rig designed to drill 300-foot holes. Yes, it could be set up to drill to 1,000 feet, but how much time and extra equipment will be required? Choose the rig that is best for your company&#;s operating area. Next, choose a rig that can adapt and evolve to the work in your ever-changing drilling environment. Henry Ford said, &#;If I had asked my customers what they wanted, they would have said a faster horse.&#; His mindset pushed the automotive industry. In the drilling industry, I ask you, &#;Do you need a racehorse or a workhorse?&#; Diversifying is essential to a long successful business, but what type of work is most relevant to your area?

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