As I look back at the past year in the drilling industry, the changes are pretty dramatic. I would say shocking to a lot of people, but I have seen these cycles come and go, so it’s no big surprise. The drilling industry has always been a boom-or-bust kind of business.
The most obvious change has been in the oilfield side of drilling. A little over a year ago there were 1,690 rigs running in the United States. As I write this, the Baker Hughes rig count is 709. That is a loss of 881 rigs. Where did they all go? Some of the older and less competitive rigs were scrapped out, so they are gone for good. But there are a large number of latest-generation rigs that are “hot-stacked.” This means that they are complete, and ready to run at the push of a starter button. The industry calls them zombie rigs. The investors think if the market turns around, they can be the first to mobilize and get the new contracts. They may or may not be right, but oilfield investors are used to quick profits and probably not going to have too much patience with the maintenance costs. These rigs represent millions of dollars each out of the economy, but there is another side: the human side.