Latest rig will get gig in West Texas
Schlumberger, the world’s biggest oil field services company, is expanding in West Texas as it deploys new drilling technology it calls the “Rig of the Future,” which aims to recover more oil from a single location in shale fields slowly returning to life.
Schlumberger CEO Paal Kibsgaard said Friday that a pilot program will launch this year by sending the first two of the next-generation rigs into the Permian Basin. The goal is to drill horizontally across shale formations for greater distances to access more oil reservoirs.
“We now have a clear path to profitability on North American land with the technology uptick,” Kibsgaard said. “This is why we’re prepared to put more capacity into play on the drilling side for what’s happening in West Texas.”
The final versions of the new rigs won’t roll out until next year. Schlumberger, Houston’s largest energy employer, is primarily based out of Houston and Paris.
During the nearly twoyear oil bust, Schlumberger expanded its market share internationally while the second-largest services company, Halliburton, increased its share in the U.S.
With the worst of the bust over, Kibsgaard said, Schlumberger aims to grow in North America again with its new technology.
“We have indeed
“This is a nextgeneration rig that’s more automated and more integrated.” Bill Herbert, Piper Jaffray & Co.
reached the bottom of the cycle,” he said. “The period of oversupply and inventory build is over, and market sentiment should soon change, paving the way for an increase in oil prices.”
The new rig has to prove itself, but it could represent the biggest advance in drilling in almost 15 years — since Helmerich & Payne’s FlexRig — said Bill Herbert, a senior energy analyst at investment research firm Piper Jaffray & Co.
“We’re going to find out,” Herbert said. “This is a next-generation rig that’s more automated and more integrated.”
The idea is to couple the rig with Schlumberger’s well-regarded drilling tools, Herbert said. Schlumberger recently acquired both Houstonbased T&T Engineering, which designed the rig, and Houston’s Cameron International, which makes much of the rig equipment.
Robert MacKenzie, an energy analyst at Iberia Capital Partners in New Orleans, said Schlumberger’s approach of investing more to get additional oil and gas goes against the recent trend of cost cutting in the industry.
“This is about spending more money to get better wells,” MacKenzie said.
Texas’ Permian Basin is the top choice to drill because there’s so much untapped oil and gas sitting in shale rock and hard-toreach reservoirs.
The Permian Basin now accounts for more than 40 percent of all the nation’s onshore drilling rigs, with 212 rigs. The next-mostactive part of the U.S. is Oklahoma’s growing Cana Woodford region with just 39 rigs. The sharpest drop has come in Texas’ Eagle Ford Shale, which still counts 33 active drilling rigs.
The U.S. added 14 rigs in the past week, and 11 of those came to the Permian. It’s the fifth overall increase in a row and the 17th in the past 20 weeks.
While Schlumberger is focused on drilling in West Texas, Houston-based Halliburton has emphasized its bread and butter, the hydraulic fracturing of shale rock within drilled wells to stimulate the release of the oil and natural gas liquids.
Kibsgaard though said Schlumberger will “hold the fort” on growing in North American fracturing because the price of the service remains deeply discounted in the U.S. Oil services companies had to cut prices to hold onto customers during the downturn.
MacKenzie said Halliburton’s strength in fracturing may give Schlumberger pause in that one area.
“Schlumberger tends to talk down the frac business because their main competition is the leader in that,” MacKenzie said.