Maxi Rig Market: Sales Slow But Work Remains Steady

The maxi rig market seems to grab all the headlines in the directional drilling community, with their ever-growing bore lengths and size of the rigs. But the headlines have been fairly quiet for the popular HDD segment, as it has plugged along over the last few years.

The maxi rig market for sales and work has taken on an ebb and flow structure over the last few years. Oil and natural gas pipeline work is critical to the overall health of this HDD segment. As the worldwide economy tumbled, the effect on the maxi rig market has been felt — perhaps not as strongly as other construction markets but affected nonetheless through held-up project funding, for example.

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In speaking with rig manufacturers throughout the year, Trenchless Technology has learned that while maxi rig sales are down in 2010, price quotes for the equipment has remained steady, as has the work.
“The reason for maxi drill rig sales and related products is the pipeline industry,” says Mike Sadler, national sales manager with Tulsa Rig Iron, headquartered in Kiefer, Okla. “But it does seem like the sales have shifted. As the pipelines have moved from Canada to the northern United States and now the southern United States, the sales have followed along. Two years ago, most of the maxi drill rig sales were up north. Today, they are in the southern part of the country in places like Texas, Mississippi and Louisiana, following the pipeline construction as it moves further south.”

A few of the pipeline projects taking place in the South include the Phase VIII Expansion Project, which will consist of approximately 483.2 miles of multi diameter pipeline in Alabama, Mississippi and Florida, with approximately 365.8 miles built parallel to existing pipelines. Florida Gas Transmission Co. estimates the total cost of the project will be $2,455 million. ETC Tiger Pipeline LLC (ETC Tiger) is proposing to construct, own and operate a new interstate natural gas pipeline to provide takeaway capacity from the East Texas Carthage Hub area and the Haynesville Shale play.  The ETC Tiger Pipeline will begin near Carthage, Texas, and extend to the Perryville, La., area.

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“Around the world, there is still a lot of quoting activity going on for maxi rigs,” says Ed Savage, trenchless product manager at Vermeer, which offers five maxi rig models ranging in pullback from 330,000 lbs to 1.32 million lbs. “The maxi rig market definitely ebbs and flows with the price of crude oil and natural gas. The surprising thing is that even with natural gas below $5 [per 1,000 cu ft], there is still a lot of activity in natural gas in North America. In past years, you would always hear that if natural gas dropped below $7 [per 1,000 cu ft] that activity would drop off. We’ve been below $5 for a quite a while and the activity is very good, which is helping the large drill market.”

It’s an Investment

Purchasing a maxi rig is a huge financial commitment for a contractor to make. At their bare bones level, maxi rigs are a $1 million-plus investment. Tack on all the bells, whistles and other packages a contractor may want, then you are pushing the price tag to the $4 million to $4.5 million plateau. The need for a new maxi rig isn’t fulfilled every few years, such as perhaps a compact rig — these rigs are become lifetime members of a contractor’s fleet.

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The financial commitment can be staggering if the work isn’t there. That’s why these rigs aren’t purchased unless the contractor is confident that the jobs are there to pay it off. “Typically before a customer will jump in and make a commitment to buy a maxi rig, he’s got at least one if not a few jobs already lined up on the books that he knows he’s going to get,” Savage explains. “It’s not something like a smaller rig, where they might buy it on [job] speculation. With a maxi rig, [the customer] knows what he’s going to use it on.”
Those who are purchasing the maxi rigs — which are considered anything higher than 100,000 lbs of pullback — are the returning customer, looking to bolster his or her fleet. These customers are typically those who have been in the maxi rig market for a long time and know what they want. “They know what it takes to be in the maxi rig game,” Savage says, noting they know what it takes in terms of transportation, setup/teardown and planning of these large jobs.

Whereas in years past, when maxi rig orders were usually custom-built for a specific job, today, most rigs are pretty standard as manufacturers understand what the contractor needs — although there is still customization when the job calls for it. “The [maxi] rigs today are pretty standardized,” Sadler says. “In the past, [manufacturers] relied on the customer to tell them what they wanted. As time went on, the rigs have become much more standardized.”

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A standard rig comes with a drill rack, operator’s cabin, power pack or engine/hydraulic package, drillstring, tooling package and location device. A big part of the equation is the high-pressure mud pump and reclaimer. Standard size mud pump for a maxi rig must be at least 400 gpm, Sadler says.

“[These size projects] take a lot of fluid,” he explains. “The faster you can carry the cuttings out, the faster you can drill a hole.”

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Trends for the maxi rig in the past have been the large mud pump, as well as downhole flow monitoring. These days, the words are automation and sophistication.

“Automation like we have for the smaller rigs is slowly creeping into the maxi rig market,” Savage says. “In the past, the rigs were crude with manual controls. Today, we are adding more automation and software where [the operator] can set the pullback speed or pullback pressure, just like on the smaller rigs. This takes some of the fatigue off the operator so they don’t have to monitor that manually.”

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Sadler agrees. “They are more automated and more sophisticated, with software to make the decisions for the driller,” he says.

Sharon M. Bueno is managing editor of Trenchless Technology.

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Maxi Rig Manufacturers

(100,000 lbs of pullback and higher)

American Augers
West Salem, OH
Ph. 419-869-7107

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Barbco Inc.
East Canton, OH
Ph: 800-4488934

Ditch Witch
Perry, OK
Ph: 800-654-6481

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Herrenknecht AG
Schwanau, Germany
Ph: +49 7824-3020

TT Technologies
(Prime Drilling Gmbh)
Aurora, IL
Ph: 630-851-8200

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Tulsa Rig Iron
Keifer, OK
Ph: 918-321-3330

Universal HDD
Lake Zurich, IL
Ph: 847-955-0050

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Vermeer Corp.
Pella, IA
Ph: 641-628-3141

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