Carlyle 鈥� Derrick Big Eagle couldn鈥檛 go see what was left of the drilling rigs he had built, as several were scrapped in recent weeks in the former Eagle Drilling Services yard in Carlyle.
Some of the eight former Eagle rigs were among the 10 Saskatchewan-based rigs Ensign Energy recently scrapped. Those yellow rigs sat, along with several orange former Totem Drilling rigs, in the Carlyle yard for the last five years, unmoving, as the oil downturn that took hold in late 2014 dramatically curtailed drilling demand.
Five were cut up and hauled away from the Carlyle yard. Another was cut up in place northwest of Stoughton, three more at Carnduff, and the final one in Waskada, Manitoba. Some of those were not originally Eagle or Totem rigs, but rather former Trinidad Drilling and Ensign rigs, as reflected by the paint schemes in the piles of chopped up scrap.
The first Eagle rigs were built in 2005, the eighth was completed in 2010, and the rigs that were cut up haven鈥檛 moved since 2015. That means that some of those rigs had just 5 to 10 years usage.
In December, 2018, Ensign Energy delisted 17 rigs from the Canadian Association of Oilwell Drilling Contractors (CAODC). In August and September, 10 rigs that had been based in Saskatchewan were torn apart for scrap. Daily Oil Bulletin reported at the time that 14 telescoping doubles were part of that 17 rigs, and the most recent one delisted was built in 2011.
Big Eagle, founder of Eagle Drilling, called it 鈥渉eartbreaking,鈥� on Sept. 15, saying, 鈥淚 actually didn't even go watch it. It broke my heart so badly because I built those rigs that I thought that they were going to be 40-year rigs.
鈥淚 didn't even go look at the pile of scrap or nothing. Everybody鈥檚 saying to me, 鈥楬ey, they're cutting your rigs up over there, you know that?鈥� I heard about it, but it is what it is,鈥� he said.
Eagle Drilling fired up in 2005, and by the time it sold to CanElson Drilling in 2010, there were eight brightly painted rigs. The office was adorned with aerial photos of several of them working in close proximity to each other during the height of the Bakken boom.
Asked what a life expectancy of a drilling rig would typically be, Big Eagle pointed to old Simmons rigs that were 鈥渁s old as the hills鈥� before they were finally retired and cut up. 鈥淭hey were older than I am,鈥� he said, 鈥渁nd they were definitely not built to the quality that the Eagle rigs were built on.
鈥淚 put thicker walls on mine, thicker flooring, better quality metal, to make sure that they鈥檇 last. I wanted my goal to be that my grandkids鈥� kids would be able to look out in the field and say, 鈥楬ey, that鈥檚 one of Grandpa鈥檚 rigs.鈥�
鈥淚 wanted them to last a long time, so we put a lot of extra effort into it.鈥�
Ensign Energy did not respond to a request for comment. Regarding what Ensign鈥檚 possible motivation might be, Big Eagle said, 鈥淚 guess that鈥檚 market share, and eliminating opportunities for anybody else to get into the market.鈥�
鈥淣obody is going to get any money to build a $9 or $10 million drilling rig right now. Nobody's going to fund that. So everybody's going to be looking for the used stuff. And if the used stuff is all gone, then that means that there's no more competitors for them.鈥澛犅�
With little used inventory available, it forces competitors to go to new equipment, nearly all of which will require raising significant funds. 鈥淎nd nobody鈥檚 going to give them any money,鈥� Big Eagle said. 鈥淪o, from a market share perspective of looking at Ensign and Precision, that was a right move. They eliminated the opportunity from any competitors. So in the long run, it's worth it for them.鈥�
For Dennis Day, president of Fast Trucking Service, a Carnduff-based rig moving company, each rig cut up means a customer lost.
鈥淚t鈥檚 tough,鈥� he said on Sept. 14, when asked about that.
Fast Trucking, in an effort to clean up its own yard, hauled out 1,039,000 pounds of scrap in July, alone, in addition to the work Ensign did in their yard. More scrapping has been done since. The iron Fast Trucking cut up was largely much older than what Ensign was cutting up. But Fast did actually buy six older jackknife rigs that Precision Drilling was going to chop up.
鈥淪ome of them will get cut up. Some I鈥檒l keep. And will I ever sell them? I hope so, but probably not,鈥� Day said. 鈥淚t鈥檚 just a gamble, right?鈥�
Asked for comment, the Ministry of Energy and Resources emailed the following statement on Sept. 15:
鈥淒rilling rigs are depreciating capital assets with finite life spans. As drilling rigs age, technology and modernization may make rigs obsolete or render normal repairs and upkeep too costly to remain operate. A decision is then made on whether to upgrade/retire/store/sell the drilling unit. Normally, rigs that are current and are still capable of operating are not retired or scrapped.
鈥淯nfortunately, in the current oil market environment, decisions to retire a drilling rig instead of spending the capital to upgrade, repair, or store the rig are made.
鈥淭he Government of Saskatchewan is optimistic that rebounding oil prices and demand will be key drivers in growing production and spurring investment in new drilling. The province is actively engaging with industry stakeholders on scoping potential new initiatives to help accelerate new investment and grow employment in the oil and gas sector as the industry continues to recover.鈥�
