Speaker: Low oil prices to affect drilling companies

A drilling consultant and contractor for independent oil and gas companies says the drop in oil prices has not yet hit the industry, but is going to have a big impact.
Bruce Jordan, president of Stokes & Spiehler in Lafayette, was the guest speaker at Tuesday’s Atchafalaya Chapter of the American Petroleum Institute meeting at the Petroleum Club of Morgan City. At Stokes & Spiehler, Jordan does work for independent oil and gas operators as a drilling and completion superintendent, drilling engineer and production engineer, for land, inland, and offshore Gulf Coast operations.
Jordan is also a managing member of Drilling Partners LLC, which is a company that functions as a turnkey well operator and is supported by Stokes & Spiehler, he said.
The decrease in oil prices will have a big effect on independent drillers though the industry has not seen the effects yet, Jordan said. “We’re just going to have to deal with it as best we can,” he said. “It’s just going to be a matter of dealing with it and working through it. We’ll survive,” Jordan said.
During the meeting, Jordan discussed turnkey wells, which he described as “no log, no pay” wells, he said. “Fortunately, we’ve had more log and pay than no log, no pay,” Jordan said.
Burt Adams, president of OGRS LLC in Morgan City, said a turnkey operator hires the drilling rig, personnel, buys the equipment and drills the wells for an oil company. “When they make a log, the oil company pays them the full turnkey price,” Adams said.
A log refers to getting to the bottom of the hole that the rig drilled and using a logging tool that tells the operator if rock, sand, oil, gas or water exists at the end of the well, Adams said. “That log is your electronic information that says what your pay zones are at the bottom of your well,” Adams said.
If the turnkey operator does not make a log, the operator does not get paid anything, Adams said. “So it’s a high risk,” Adams said. “No log, no pay” means that the operator did not get to the log, or end of the well, Adams said. The turnkey operator gets paid even if there is no discovery as long as the operator gets to the bottom of the well, Adams said.
Other than having a rough time in 1997, Drilling Partners LLC has done pretty well as a turnkey operator, Jordan said. “It’s a tough business,” Jordan said. “There’s not too many that are in the business because it’s an easy business to get run out of as we did in 1997,” Jordan said. All the turnkey wells Jordan mentioned during the meeting were located in south Louisiana, he said.
The company worked for Atlantic Pacific Marine Corporation in Houma, which drilled 16 turnkey rigs from 1986 to 1992, Jordan said. Atlantic Pacific Marine drilled 70 wells between 1986 and 1992, he said. That turnkey experience for Stokes & Spiehler laid the foundation for a company called Drilling Partners Inc., Jordan said.
After a hiatus, the company started up again as Drilling Partners LLC in 2003, he said. “That’s still going on today,” Jordan said.