It is a hurricane of pain for land drillers after operators cut rig count in half during the first four months of 2015. While the land drilling sector is not out of the woods, the bottom is in sight, likely before—or right around—the end of the second quarter. That bottom may match the 56% reduction in rig count the industry witnessed during the 2009 downturn.

The current downturn has exceeded the steep trajectory from 2009. Essentially operators are removing an estimated $60 billion in domestic land-based capital spending during the first six months of 2015. The reduction is indiscriminate, with the most modern rigs stacking out side-by-side with legacy conventional mechanical units as operators bring spending in line with reduced revenues.

“I wouldn’t say it is ‘doom and gloom’ anymore,” a top-tier driller working in the Haynesville Shale told Hart Energy. “We already hit that. But we are having to cut our workforce and watch everything we do and work strictly off of performance.”

A majority of drilling now either involves contracted work, often at rates renegotiated lower in exchange for time extension, or efforts to meet lease obligations.

As one mid-tier publicly held Permian Basin operator said, “We are going to slow down and not do anything we don’t have to do, so we will complete the wells we started. Rates haven’t come down enough, but there are a lot of rigs available, and pricing is coming down.”

Operators participating in Hart Energy surveys said rig rates would have to drop 30% for drilling to make economic sense in the Permian at $50 oil.

Rig rates are, in fact, coming down. Rates for Tier I AC-VFD 1,500-hp units peaked at $26,000 to $28,000 on average in most markets. At press time, survey results showed rates for the same rigs had dropped to $19,000 to $21,000 per day—and lower in markets that have been hit hard by the slowdown. By the time the process runs its course, benchmark rates for the highly desired 1,500-hp Tier I units may fall into the $17,000 to $19,000 per day range. Rates for those units are already in that vicinity in the Midcontinent market, though there is little demand for new work at any price.

The lack of work points to a greater issue when it comes to tracking pricing. There is not enough new work to produce a reliable figure for leading-edge rates. Furthermore, equipment like top drives that had been priced separately from the day rate is now folded into the daily rate, masking an even greater reduction in pricing for drilling services.

“We are trying to get our rigs to work at a 30% discount to what we were getting. We want to make payroll,” a mid-tier publicly held driller who operates in the Barnett/Haynesville/East Texas region told Hart Energy.

“Operators are trying to get out of contracts, buying some out, but mostly companies, if you have a good relationship, will keep on drilling,” a mid-tier privately held driller in the Permian Basin told Hart Energy. “They are taking advantage of the low drilling cost.”

The Midcontinent appears to be the market hit hardest—despite the fact that the only play in the U.S. able to maintain a steady rig count to date is the Cana Woodford. Spot market rig rates are down between 35% and 40%, though there is little demand for rigs outside the Cana Woodford and SCOOP, even at that pricing.

Both operators and contractors told Hart Energy surveyors that demand for drilling services may return late third-quarter 2015, with some contractors in the Haynesville/East Texas area noting a recent small rise in bid inquiries.

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