Everyone is waiting for drilling to pick up from mountains of Northeastern PA to plains of North Dakota, to Rockies in Colorado and the oil fields in West Texas. We are starting to see a slight blimp in the rig count in Texas and North Dakota. Will it continue? I don’t think anyone can forecast movement in the rig count with any degree of certainty.
There seems to be certainty around two components when the rig counts increase which means drilling will pick up.
Where will E&P Companies Find Workers?
Shale Directories have been involved in a number of industry events in 2016 in the Appalachian Basin. At almost every event, E&P Companies have expressed concern about finding workers when drilling picks up which it will if the NatGas prices continue to be strong and reach the $3.00 – $3.50 price levels by the end of the year.
At last week’s DUG East Conference, E&P Companies began to mention the idea that they may have to pay a signing bonus to get good workers to return to the oil and gas industry. Many of the drilling areas in the Appalachian Basin had never experienced any drilling which occurred in the early years of the play. A number of good, talented workers jumped into the oil and gas industry with its attractive compensation and benefits packages. Many of them are now in other industries with new jobs. It remains to be seen if these workers will return. If local oil and gas workers do not return to the industry when drilling picks up, will we see another major influx of oil and gas workers from Texas, Louisiana, Oklahoma and North Dakota?
How ready are the rigs?
There are hundreds of stacked rigs throughout the U.S., but they are not ready to go. I read an opinion in OilPro last week where someone pointed out that many of these rigs have used for parts for operating rigs. With the considerable pricing pressure on the oil field service companies, they have purchased not new parts, but rather cannibalized them from existing rigs. Hence, when the drilling picks up considerably, there may not be enough rigs to meet the demand.
When the drilling picks up, the phenomenon of these issues will be that the E&P Companies will pay whatever, it takes to drill. The pricing pressures on contractors will go away. The phrase, “I don’t care what it costs. I need it on the well site now,” may be heard again.
I’ll be monitoring this closely. Stay tuned to see if this happens.