Oct. 26, 22
In the mineral exploration drilling business, drilling rigs and equipment are critical to winning bids, completing contracts and making money. Buying a new rig is a big decision and many variables and factors can influence that decision. The biggest question one must answer is, "Will this rig make money? Or will it cost more than other options that can achieve the same goals for less?"
Now that the market is growing slowly, many drilling contractors are deciding whether they should rebuild idle rigs or buy new ones.
Operations managers know which components (engines, valves, assemblies, etc.) need to be replaced, and they usually have a fairly accurate idea of the cost of rebuilding iconic rigs in their fleet. If the cost of rebuilding is close to the cost of buying a new rig, they may choose to conduct a full audit to examine each rig, assess the inventory of spare parts and check maintenance records to get more accurate information to compare the cost of getting the rig ready to work again.
As the market improves, everyone can expect longer lead times - whether you are rebuilding or buying new. When the market is down or very low, stocks increase, factories are not busy building new rigs and lead times are reduced. As the market improves and contracts increase, inventories decrease, factories are busy building more rigs and lead times tend to increase. Ultimately, lead times vary from manufacturer to manufacturer.
In addition to cost, other factors include whether the drilling company has the time, talent and capacity to overhaul a rig that is idle and needs work. Overhauls can take three to four months and require facilities, tools, a labour pool of mechanics (who may already be working on other rigs to keep them running), and a contract for the knowledge to get the rig ready for drilling.
Rigs with rod handling equipment typically have fewer hand and back injuries to crews, as well as less overall stress and strain. Mechanised rod handling also saves on labour costs and staffing, as no additional staff are required to handle the rod manually. In addition, as drilling service providers with newer equipment with rod handling capabilities are well known in the market, you may be invited to participate in more tenders. When rod handling is first introduced, productivity suffers as machine rod handling is not as fast as manual rod handling. However, productivity can be maintained by using newer technology.
Rock Blasting Drilling Rig
Used rigs are usually more prone to breakdowns than new rigs, and downtime can affect hard-won drilling contracts. Costs can add up quickly due to lost productivity, rig uptime contractual obligations and repairing rigs. A well-maintained drilling fleet in good operating condition not only contributes to productivity, but also prevents contractors from being dismissed from contracts or sites.
When buying a new exploration or production rig it can be tempting to shop for price as there are many low cost options out there. However, as with any other major purchase, it is important to assess the total cost of ownership. A lower priced rig may actually have a higher total cost of ownership. Taking the time to price important replacement parts and spares can prove to save money in the long run.
Another thing to consider is the availability of these components. When buying a low-cost rig from a company that does not have a global presence, the availability of local spares and delivery times for replacement parts can affect your profits. Many smaller manufacturers only support their customers on a regional basis.
The reliability gained from buying high quality components means that components don't have to be replaced as often, which means that it costs less money to run that rig for longer uptime than if you were to buy something at a lower price.