HDD Market Rolls On: Fiber Deployments Keep HDD Contractors Busy, While Oil and Gas Slows

The state of the horizontal directional drilling (HDD) market is always an interesting story to tell. HDD is not a discipline that is used in just one construction segment but across several; its diversity has allowed HDD to weather industry low points and enable it to grow and expand.



Simply put, HDD’s diversity means there is always something to talk about. The last few years, we have witnessed the rise and fall of the oil and gas market and its effect on the HDD market, specifically the big rig players. Now, it is the resurgence of the fiber-optic/telecom market that has taken center stage, making the compact and midsize HDD markets thrive. Water and sewer work continues to be a steady force as municipalities address their infrastructure needs and have come trust the use of HDD to get the work done.

What does all this mean for the overall HDD market? Generally speaking, it’s good to be working in the HDD market these days, say the industry professionals we spoke with.

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“Life is still good right now for HDD contractors, especially for the midsize to small contractors. That market is fairly robust and is the strength of the market right now,” says Vermeer senior global product manager for underground Jon Kuyers. “The fiber activity is still strong and prices seem to be holding up in most areas. Natural gas replacement continues to be strong. In water, we still see activity.“Words I would use to describe the market are solid, strong and positive,” he adds.

Ditch Witch vice president of product strategy Randy Rupp says 2016 has been a pretty good year for the HDD market, depending on which sector you work in. “Depending on which segment of the HDD market you are in, it can be incredibly robust,” he says. “We’re going to sell more drills this year than last, but the mix is different. Our midsize and compact units meet the fiber demand and natural gas installations and rehab units are selling very well. There is a slowdown with the larger units, because of oil and gas slowdown.”

From the engineering side, trenchless technology is keeping them busy, as well. Michelle Macauley, national trenchless practice leader and senior geotechnical engineer at Jacobs, says there has been a lot of work to keep her market segment busy, which is primarily water and sewer, as more and more municipalities turn to HDD to address infrastructure needs. She is seeing a lot more two-rig mobilizations, as the intersect method has gone from new industry trend a few years ago to common practice today.

“It’s been very busy, from design projects to construction projects,” she says. “Seems like every time we turn around, there’s another project coming up. It’s great to be busy. Owners are looking at more challenging crossings, trying to get more length and larger diameter, and into more challenging soils.”

Macauley further notes that owners are utilizing design-build contracts more and more for trenchless technology and specifically HDD. “We are seeing a lot more owners wanting to get contractor involvement in the design phase to try to address risks and mitigate risk before they happen.”

Steve Meaders has spent 40 years in the drilling industry, starting his HDD career with Cherrington Corp. in 1976. Today, Meaders is director of HDD operations at Mears and says he has experienced the cyclical nature of the drilling industry and is not overly concerned about the slowdown some facets of drilling are facing in 2016. Mears primarily works in large diameter sector such as oil and gas and electrical.

“All the [oil and gas] work now in progress for us has been in the making for one to two years,” he says. “The market is definitely in transition. On one hand, it has become far more regional, seeing HDD contractors traveling 2,000 miles to bid on projects. The use of HDD continues to expand with engineered, more complicated projects becoming a separate segment of the work. The market is flooded with rigs and new HDD contractors, which adds overall risk in just selecting a qualified contractor.”

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Fiber Market

The last few years has been more than generous for the mid-size to compact HDD driller, thanks to the high demand of fiber deployments throughout North America. Whether the consumer’s need for bandwidth and Internet service stems from entertainment (Netflix and other streaming sources) or business interests, demand for fiber-optic lines has never been stronger. We’ve written about the fiber boom over the last few years and it continues to drive the mid-size to compact HDD market and will for the foreseeable future.

According to its most recent survey, released in November 2015, the Fiber-to-the-Home (FTTH) Council Americas shows that fiber deployments in the United States increased 13 percent in 2015.

“From our survey of North American broadband providers, we have found that fiber-to-the-home deployment has continued to grow steadily and 2015 marks the second biggest year for expansion since the technology became available,” said Michael Render, president of RVA LLC, which conducted the survey, in a news release about the report. “The industry is poised for substantial growth over the next five years.”

According to the FTTH Council survey, in 2015, nearly 3 million new homes were passed — meaning that fiber is available — in the United States and this recent boom in fiber to the home deployment began in 2011, which coincides with an uptick in the HDD market.

The HDD market has seen this before but not at this sustainability and long-term need. In the late 1990s, when the Internet was really starting to take off, HDD experienced a huge influx of work as the new networks were being constructed. The end of that work coincided with the HDD market bottoming out, taking years to recover. Today, HDD drillers are relishing the upswing in this communications work and know the need is long-term. Drill rig manufacturers such as Vermeer and Ditch Witch are eager to supply the rigs to meet this increasing demand.

“I still see that market continuing to be strong for quite some time,” Kuyers says. “The reason being there is so much deployment that needs to happen. Think about some of the bigger cities that Google Fiber is working with and deploying fiber in, as well as AT&T and Century Link and the local providers. Everybody is deploying fiber. These projects will be strung out for years to come.”

Rupp concurs with Kuyers thoughts on the fiber market, noting that the difference in the fiber market then and now is the consumer demand. “In the late 1990s, everybody knew that fiber was going to bring faster Internet, better signals and pictures, but nobody was demanding them,” Rupp says. “It was like that industry was trying to get out ahead of the curve. Today, phones are getting more sophisticated and there is a real demand for faster Internet speed and for better cell connection. All of this is being driven by the consumers. When something is driven by the consumers and they are willing to pay for it, it makes for a much more stable industry.”

Rupp says that generally speaking, there isn’t any part of the United States where people are happy and satisfied with their Internet service. People always want it faster, clearer and bigger, he says. “This kind of work is going on everywhere because if you are an Internet provider, you can’t afford to be the one with the slowest Internet service. And as the fiber gets closer to the neighborhoods, HDD is the perfect option to get it installed.”

Oil and Gas

Now for the more subdued side of the HDD market. Just a few years ago, oil and gas was the talk of the town for HDD drillers. New maxi drills were unveiled at the big construction shows just a few years ago, as the pipeline work permeated the HDD market. There was a tremendous surge in work with the emergence of the Marcellus and Utica shale plays in New York, Ohio, Pennsylvania and West Virginia, as well as the Bakken shale play in Montana and North Dakota.

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Rig makers in 2015 told us of the contractors’ reserve in purchasing the large drills, as the market continued to dip. The price of oil remains the lynchpin it seems on how the market will swing and with the lower cost per barrel taking hold, the market suffered. The low prices at the pumps are welcome to the consumer’s pockets and household bottom lines, but for the oil and gas companies (and the HDDers involved with putting in the pipelines), not so much.

“The oil and gas work [for HDD] is down,” Kuyers says. “It is slower, but has not completely shut off.”

The uncertainty of the market and its volatility has drillers hesitant to go shopping for new equipment. The work being done today is projects that were already on the books before the slowdown and not newly let ones. “There is a lot of angst about what is going to happen next and the contractors are not quite willing to invest in new equipment to grow their fleets. That’s the nature of the business.”

Meaders agrees with that mindset of the pipeline drillers right now, saying he has seen that in contractors. He has two words to describe how the oil and gas market is treating HDD drillers: Delays and hesitation. “Contractors are reluctant to spend right now, even on ready-to-go projects,” he says.

Rupp says he is seeing a little positive movement by oil and gas HDD drillers, at least in inquiring about what machines are available. “Waiting is a good word to describe what contractors are doing,” he says. “But we are starting to see a very small uptick in the number of questions and the interest in our larger drills. It’s still down dramatically from where it was at the peak of the oil boom.”

The Case for Mud

Some things seem to never change in the HDD industry and such is the case for drilling fluid disposal. Debate has raged on by legislators and regulators regarding the use and proper disposal of drilling fluids from jobsites. Disposal costs continue to be a huge issue for HDD contractors, as the costs to transport and get rid of the used mud continue to escalate and frustrate drillers. Manufacturers are working on cleaning technologies to try to ease the disposal burden for contractors.

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Rupp says contractors are dealing with disposal issues on a daily basis, whether the fluid was used on a drilling project or from potholing to expose existing utilities. Some contractors are forced to drive two or three hours each way to an accepted disposal site, a cost that affects their bottom line.

“I think it’s correct that there is more concern by states and municipalities about mud and mud disposal,” Rupp says. “Some of it is from a lack of education of what is in the mud but some of it, too, is just their landfills are not designed to handle that much liquid. We’re continuing to work, whether it’s on products to help separate and dry the mud or studies with Oklahoma State University to try and figure out ways to properly spread that mud over fields or pastures as a soils additive to help the growth. At the Ditch Witch factory, we feel that, as a good partner, we need to help and continue to find ways to better dispose of mud.”

Meaders says he has been dealing mud disposal issues for 40 years and he doesn’t understand why owners and cities don’t see the drilling fluid for what it is: clay and water. “People are concerned about what goes into and what comes out of the ground and they should be,” he says. “We should always leave our jobsites as clean as possible. There is nothing more environmentally friendly than clay and water. It’s been used forever by water well drillers but for some reason it is viewed very differently when utilized for construction purposes.”

He notes that mud disposal in Canada is a bit easier on HDD contractors, as many owners there take on the task of mud disposal off the contractors’ hands. “In Canada, many owners tend to handle [disposal] themselves,” Meaders says. “Since it’s such a huge part of the bid project cost, many owners believe they have a better handle on it and they will provide a company to process your cuttings and fluids. Take it right from the pits. As a drilling contractor, you love that.”

Sharon M. Bueno is managing editor of Trenchless Technology.