The increase in crude oil prices, up more than 23% since last January, is testing the resolve of E&P companies looking to maintain the increased capital discipline they developed since the mid-2014 market decline. By taking a measured response to the price increase, these companies are returning to the field and the drilling market is showing signs of this return. As well complexities and lateral lengths increase, so do the demands placed on drilling contractors to provide capable rigs and technologies to make hole in an affordable, efficient and safe manner.

Brighter expectations

Domestically, the U.S. Energy Information Administration (EIA) estimated in its February 2018 Short-term Energy Outlook that U.S. crude oil production averaged 10.2 MMbbl/d in January, up 100,000 bbl/d from the December level. In addition, the EIA forecasted the total U.S. crude oil production will average 10.6 MMbbl/d in 2018. If it were to happen, it would surpass the previous record of 9.6 MMbbl/d set in 1970 as the highest annual average U.S. crude oil production level.

The increase in the U.S. rig count, up more than 27% since last January, sheds some light on how it is possible to break 48-year-old records. The average U.S. land rig count for January 2018 was 937, up 254 from last year’s count at 683, according to Baker Hughes, a GE company.

Westwood Energy Group reported in its recent “World Drilling and Production Market Forecast for 2018-2024” that the U.S. onshore drilling activity is expected to rise at a cumulative annual growth rate of 11% over the forecast period, with onshore production growing 3% year-on-year over the same period.

Land drilling contractors prepared during the market downturn for a new future by working with customers to ensure, both through newbuilds or upgrades, that the right rig for the job would be available and by embracing the digital revolution. Patterson-UTI, Helmerich & Payne (H&P) and Nabors Industries—the big three land drillers—hold more than a combined one-third of the overall market share in the U.S.

“Despite widespread concerns for lower industry drilling activity, our rig count rebounded through the quarter,” Patterson-UTI CEO Andy Hendricks said during the company’s fourth-quarter 2017 earnings call on Feb. 8. “Our average rig count for the fourth quarter was unchanged relative to the third quarter at 161 rigs. For the month of January 2018, our average rig count was 165.”

The company completed upgrading seven of its APEX 1000 rigs to its super-specification APEX XK rigs and has customer contracts to support upgrading five additional APEX rigs, with two to become APEX XK and three to become APEX PK rigs, Hendricks said, adding that all five are expected to be delivered in first-half 2018.

“Based on contracts currently in place, we expect an average of 96 rigs operating under term contracts during the first quarter and an average of 67 rigs operating under term contracts during 2018,” he said.

Super specification for longer laterals

John Lindsay, president, CEO and director for H&P, said during the company’s first-quarter 2018 earnings call on Jan. 25 that the downturn has been a challenging threeyear journey but that the company has spent the time preparing for the future. These preparations included upgrading its FlexRig fleet to super-specification to provide the right rig for the job and the acquisitions of MOTIVE Drilling Technologies and MagVAR in 2017.

Lindsay cites the increased length of laterals as the primary reason customers want super-specification rigs.

“Lateral lengths have increased to the extent that this is pushing the limits of the standard AC drive rig fleet,” he said. “In 2017 the average lateral increased another 15% to approximately 8,000 ft [2.4 km], and we expect this trend of longer laterals to continue. As a reference point, the average lateral in 2015 was approximately 6,000 ft [1.8 km].”

H&P defines its super-specification rigs as having an AC drive, 1,500-hp drawworks, 750,000-lb hookload rating, 7,500-psi mud systems and multiwell pad drilling systems.

“H&P currently has 171 super-specification rigs operating at approximately 98% utilization,” Lindsay said. “We believe there are another 200 to 250 rigs in the industry where upgrades to superspec capacity would be economically feasible, and H&P owns roughly half of those.”

The company has approximately 30 FlexRigs that are active and can be upgraded to super-specification status in the field with a $2 million to $3 million investment, he said, adding that the design of the FlexRig allows the company to reinvest in its fleet to enhance rig capabilities for more challenging and complex well designs.

“Since the first fiscal quarter of 2017, we have upgraded 107 FlexRigs to super-spec capacity,” he said. “If customer demand remains and we are able to achieve reasonable pricing, our upgrade cadence could average 12 or more FlexRig upgrades per quarter.”

The MOTIVE Drilling Technologies and MagVAR acquisitions in 2017 deliver technologies that deliver real-time actionable results and enable enhanced collaboration for onsite and offsite rig teams.

“MOTIVE and MagVAR are technology leaders in their respective space,” Lindsay said. “These technologies provide additional value for our customers through improved wellbore quality in placement while offering the flexibility to utilize these services regardless of the drilling contractor or directional drilling company.”

Quads and robots

In 2017 Nabors launched its first PACE-X rig featuring the quad drilling design capable of handling stands of four drillpipes versus a stand with three drillpipes. The design features an additional 9.4-m (31-ft) section of mast, decreasing the number of connections by 33%. The design also enables running double joints of casing and offline casing-stand building. For example, during operations for a customer’s three-well pad, there were about 900 fewer connections made, saving about 43 hours, according to the company’s third-quarter 2017 earnings presentation.

On the rig automation front, in September 2017 Nabors announced its acquisition of Stavanger-based Robotic Drilling Systems AS (RDS), a provider of automated tubular and tool handling equipment for the onshore and offshore drilling markets.

The RDS modular system is a key component to the company’s PACE-R800 fully automated drilling rig. Featuring an electric rack and pinion hoisting system with a capacity of 800 kips and push capability of 66 kips, the eight pinions are driven by permanent magnet motors to provide the redundancy and precise control needed for automation, according to the company.

The robotic electric pipehandler is designed to handle drillpipe and casing from 3½ in. to 133⁄8 in. without changing grippers. The tong and slip can handle 27⁄8-in. to 15-in. tubulars without changing dies. The two-level rig floor design keeps personnel out of harm’s way in that all operating equipment is located on the lower deck with personnel operating from the second level, according to the company.

The “brains” of the PACE-R800 rig is the company’s Rigtelligent operating system and an integrated suite of drilling software, equipment and services, including ROCKit for directional steering control that oscillates the drillpipe to reduce friction and increase penetration rate and REVit to mitigate stick/slip issues through the constant application of more torque to the bit.

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