The PDC Bit killed the Oilfield

I know I usually don't blog on Sunday but living in the Bible Belt keeps one thinking about the good Lord... and energy exploration. Plus my Jewish friend C.W. (who celebrates the Sabbath on Saturday) sent me this. You'll find a significant correlation in information between this article and a few of my older posts and since the NY Times has been tapping into my blog I wanted to be sure y'all new that my information truly is cutting edge. My sermon is simple....

Jesus Saves,
God Spends... &
We Consume.

Our consumption, or rather over-consumption, has gotten us in trouble once again. We are a nation of heavy-hitters, over-eaters and over-reactors. In my last post I wrote of changes-- quick and even rash changes. We have to be real about our economic recession. Things are not better than they seem, they are going to get worse. I wish they were not but they are. 3 years ago when I first entered the oilfield, the outfit I was with must have hired a hundred employees in a year's time. The oilfield was booming and we needed as many hands as possible to meet the demand. They over-booked to cover themselves in case another worker was ill or needed a vacation or left/fired. A company with 300 employees 2 years ago, servicing 70 - 90 jobs a day is now employing 200 employees and serving 40 jobs a day...if they are lucky. This does not include pay-cuts. Oh and did I mention that the energy stocks and companies continue to outperform the rest of the markets by at least 10% daily. I'd hate to see what the marshmallow peeps Q1 numbers look like.

When the boom hit, companies doubled their prices and their employee base. Demand and exploration is down so jobs and pay follow suit. In the Barnett shale, a service company like mine will charge $9000.00/day for a standard package. Recently, I have heard of companies offering the same services for $3500.00. Trust me this is an absurd number that barely covers the cost of tools and supplies, never mind compensation. I agree with the linked article above which points out that when the oil and gas demand increases again, we will see a sharp increase in prices at the pump. Since the oilfield and market is in a constant cycle of over-reaction, when we see a resurgence in demand, it will take time to hire recently laid-off or fired workers. Money will be thrown around again in a rushed and haphazard manner. The supply will again fall short of the demand and vice versa. Time is money and to get it done quicker...well, there will be a fee for that.

One last comment about time and the Barnett Shale. We use different drilling bits out here. Roller-cone pits, button bits and PDC bits...and others. PDC are diamond coated, and have cutters all around the edges. They are mean, aggressive, fast drilling bits. Button bits and roller-cone bits often drill at a tenth of the speed at which PDC bits drill. These Shale wells used to drill 8000' in 3 weeks at about 15'/hour. We drilled 8000' in 6 days last week. Technology is a two-edged sword as it has significantly contributed to the ease at which we are now able to drill while simultaneously taking vast quantities of money out of the pockets of many men and women (keeping even greater capital circulating throughout the economy) as they sit at home for longer durations between jobs.

Now we are cutting back so much, that oilfield hands are faced with surmounting bills and credit payments that they can not afford because they over-extended themselves believing the market would sustain itself after 4 amazingly profitable years. Not to mention the rig workers that remain in the field don't see home often because they are some of the few hands left, thereby imposing additional strain on their psyche by keeping them away from valuable time spent with their families. So when they do have time off they may self-medicate with alcohol or worse. I'm not trying to paint a bleak picture for you but I'm giving you some truths that I've realized while out here on the open road. This is the oilfield and this is part of our American landscape.

But, Dallas/Fort Worth and Texas in general maintain a flowing well amidst an economic drought. (Dallas #1 fastest growing city in the nation, Houston #2) It could be the ridiculously low housing prices, the infrastructural and industrial diversity, the non-existent state income tax and government benefits for business owners...the weather maybe, but I like to think it has to do with faith: real hope and belief in one another and a higher power. Many of these hard working longhorns are willing to make sacrifices while expecting the industry to recoup by late November and it is by the grace of God that I can spend a few bucks on my friends and family these days. Plus the mighty invisible hand of the market favors the bold.

Keep consuming...that's all we seem to do well.
Be Blessed.
rf