Trinidad Drilling reports optimism on Permian rig demand

By Luke Geiver | August 08, 2017

Drilling rig demand and dayrate prices are both improving, according to Brent Conway, president of Calgary-based Trinidad Drilling, despite unstable commodity prices. In the first half of 2017, Trinidad has seen an increase in its operating U.S. drilling fleet and it has performed maintenance and recertification on several rigs that could be entering the market in Q3 2017. Canadian operations—mainly in the deep basin—increased by 50 percent in the first half of 2017. In the U.S., Trinidad has more than doubled its operations—80 percent of which are in the Permian—in comparison to the year ago quarter.

“Visibility is improving,” Conway said of the drilling demand market. For Trinidad, Permian operations are dominating its rig fleet mix, but operators are currently showing interest and plans for the Eagle Ford and the SCOOP/STACK of Oklahoma. Of its total revenue volumes for 2017, more than 60 percent is linked to its U.S. and International operations.

The demand for higher spec, more efficient rigs that can drill wells quickly in North America has continued this year, Conway said. In some cases, the drilling rig provider has reformulated its contracts based on the desires of its clients for higher efficiency and drilling performance. “We want to make sure we are benefiting from improvements that we are providing,” he said. To do that, Trinidad has formed contracts that are either tied to commodity prices or include a performance benchmark kicker. Roughly 33 percent of Trinidad’s rig fleet is signed under contract for more than one year, and of those, one-third of the contracts already have price escalation or performance-based contracts.

This year, Trinidad has also had to relocate drilling rigs from Canada or North Dakota into the Permian. In each case, the operating client helped pay for the rig relocation move, Conway said. Trinidad currently has 28 rigs operating in the Permian.

When asked by investors if or how the company could handle the possibility of some Permian operators drilling 20,000 foot laterals, Conway said his team would be able to respond. “We have some rigs that can do that,” he said, “but as an industry, it would require upgrades or specific rigs built to be able to do those in volume.” The big question, he added, “is if going out that far will do what they hope it will do in terms of production.” The company believes its clients will all focus on drilling longer laterals, no matter where they are. And, the company has already begun planning for updating its strategy to meet the new needs of it operator clients.