Industry retooling is no longer confined to just new high-spec drilling rigs. The well service/workover market has embarked on its own newbuild cycle, with 2014 manufacturing capacity essentially sold out.

In a few cases, manufacturers are taking orders for 2015 delivery.

A Hart Energy survey of equipment manufacturers in the well service/workover segment found respondents reporting strong demand for newbuild workover rigs. The newfound interest in newbuild rigs points to a subtle change underway in the completions side of the business. As operators push lateral lengths well beyond a mile, coiled tubing has become less effective, and oil and gas operators are expressing renewed interest in the tried and true workover rig with or without an accompanying snubbing unit.

That trend is pushing demand for a beefier workover rig at the high-spec end of the market as the industry transitions into the resource harvest portion of the tight formation hydrocarbon development cycle.

While workover rigs have yet to undergo the technology transformation witnessed on the drilling rig side where walking systems, top drives, automation and integration of digital controls in the drillers cabin have now become de facto standards, change is underway nonetheless in completion rig design. Manufacturers participating in the Hart Energy survey identified recent technology improvements in rig braking systems and demand for specialized workover rigs suited to the requirements of pad drilling and batch completions as the main technology initiatives.

Of special note, manufacturers also cited rising delivery times for newbuild workover units. A few larger manufacturers are expanding production capacity to meet growing demand. Both trends illustrate a healthy market in the well services/workover segment.

In all, manufacturers contacted in the Hart Energy survey reported 316 well service/workover rigs on order with 285 destined for the domestic market. Additionally, most manufacturers noted their 2014 order books are filled—or close to it—and a few commented that they were taking orders for 2015 delivery.

The most recent design changes in modern workover units center on disc-assisted brakes to handle heavier workloads in a domestic market that emphasizes horizontal drilling on multiwell pads. Multiple innovations are under development that will allow workover rigs to adapt to multiwell pads, including removing the need to reset guy wires around the location when transitioning from well to well on the same pad. In a few cases, rigs are sporting outriggers and eliminating the need for guy wires in a fit-for-purpose design custom-configured for multiwell pads.

Customer interest is generally centered on higher spec well service equipment in the 500 and 600 series range. In fact, orders are rising for 600 series units with 35-m (116-ft) masts that are capable of incorporating top drives. Essentially, the demands of pad drilling and batch completions are prompting contractors to expand the utility of the formerly humble workover unit. Some larger series rigs have adjustable-height rig floors—up to 10 m (34 ft)—and can trip pipe as a doubles unit. In other cases manufacturers report customers are adding rotary tables so the rig can double as a top-hole drilling unit.

New rig demand is broad across the spectrum. Manufacturers point to growing international interest in newbuild workover rigs, though the current crop of equipment undergoing manufacture in the U.S. is overwhelmingly weighted to domestic deliveries. For international orders, manufacturers are building masts and components in the U.S. and shipping them overseas, where customers assemble them into units that will meet destination-specific transportation standards.

Pricing for newbuild units varies depending on how the units are finished out. But baseline 500 series units averaged $734,000 across manufacturers in the survey, with the highest price reported at $1.2 million for a specially equipped model. Average baseline pricing for 600 series units came to $800,000, though most topped $1 million once customers added ancillary equipment.

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