It's mid-January in northeast Ohio, and winter has taken hold. It seems that in the drilling industry the seasons play a significant role in profitability. Unfortunately, many contractors don't take into account the added expenses of their operation during inclement weather months.
Since this article will run in the March issue, we'll start with spring. For starters, many areas still have frost laws in effect. For those unfamiliar with frost laws, the county and township roads are susceptible to a 25-percent per-axle reduction of allowable weight on commercial vehicles - these laws are effective from Jan. 1 until April 15 in northeast Ohio. Many contractors' drill sites are in rural areas, which are accessible only by the roads that are under frost-law protection. Contractors now have to sneak the rig from site to site under the cover of nightfall or the weekend, which adds additional labor costs to every well. Lord knows, you can put only so many additional axles on a rig.
When the days turn longer and warmer, it's finally time to get working and make some money without having to worry about frost laws and mud mats. Summer and fall usually are the most profitable seasons of the year, with only equipment and labor problems to slow the industry. The exceptions during these seasons are family vacations and the South Atlantic Well Driller's Jubilee.
This leads us to the last and my most dreaded season of the year - winter. From a business standpoint, profitability is near impossible in December. Thanksgiving ends, and deer hunting season is ushered in. Deer season should be a national holiday with the amount of lost production it brings. Immediately following deer season, the NGWA convention is getting geared up. Upon returning home, you have one week to turn enough dollars to pay for a month of salaries, Christmas bonuses, holiday pay, and 60 percent of your employees' vacations from deer season. Now we lose a week to Christmas and New Year's. As if all of this wasn¹t bad enough, January starts, and we have to deal with trying to make money in the winter.
Production in the winter normally drops by 50 percent or more. Our winters start with rain and usually turn to snow before the ground has an opportunity to freeze, thus starting the mud mat season. Sunrise usually is around 8 a.m., and the temperatures are too cold for an early start. If contractors don't have a heated shop to park the water truck inside overnight, you have to drain it and get a full load of water in the morning.
If contractors don't adjust their footage rates during low production seasons, they will lose money for the day after paying 10 1/2 hours wages for only four hours to five hours of production.
It is tough enough to make a mediocre profit in the drilling industry when factoring the investment, but to compound that by cutting prices to gain market share during the slow season when production is at its lowest is poor business sense and management. The members of the drilling industry need to become responsible businessmen, factor in the changing expenses and become profitable year-round. Hopefully, none of us are in this business to lose money. Tracking expenses and production is critical to determining drilling prices - not what your competitor is willing to work for.
On another note, the nation learned the fate of the two trapped coal miners in Logan County, W.Va., earlier today. Three weeks prior, the explosion at Sago mine in Upshur County, W.Va., claimed the lives of 12 miners. It is truly unfortunate that we haven¹t had an outcome similar to Que Creek a few summers ago. Our thoughts and prayers go out to the families of lost miners.
ND
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