From stacknation to stackflation

Ballooning day rates for rigs, especially latest-generation drillships, are a potential boon for drilling contractors’ bottom lines. But not without risks.

Since 2014, more drilling contractors have shown a preference for cold-stacking over warm-stacking. Back then, with demand in the doldrums, it made sense to wait for markets to recover. But just as stagflation can hit economies recovering from recession too slowly for new job creation, ‘stackflation’ can cause major headaches through the supply chain.

The challenge for contractors has always been to have enough rigs ready to go—safely, with minimal restart costs. Field operators are naturally keen to exploit the surge in oil prices, but they pass this pressure down the line.

Drilling contractor CEOs must deliver on the promises they’ve made to the market. Their COOs need to come through for their clients. Project teams need to meet whatever promises the marketing people have made when they tendered the rigs.

During such a scenario, it’s easy to overpromise and underdeliver as happened during the last wave of reactivations in the early 2000s. Realistic cost- and time-estimates were often squeezed to meet a more palatable narrative. As teams battled with the scope of work to get the rigs drill-ready, the true reactivation costs became evident.

Will history repeat? Rigs are more sophisticated today and there’s a dearth of experienced personnel throughout the industry. Precious few remember stacking them; fewer still know how to bring them back to life.

Rig startup project teams face downward pressure from their executives and upward pressure from a supply chain emerging from forced hibernation.

How can your team avoid getting squashed in the middle?

First, understand your risks. Do you know the scale of the challenge your project team is up against, and the capability level required to meet it? Our Project Horizons self-assessment software can help you, highlighting areas that need tightening, so you maximize the predictability of your project delivery.

You’ll best serve your natural corporate aspiration to get rigs back into service as fast as possible by focusing each restart in a clear-eyed way on project profits. We developed our Rig Startup method specifically to help operators and contractors get drill-ready with minimal fuss. Tested globally, this process means your team can work quickly yet calmly avoiding the need for heroic endeavour.

Finally, through our Peer Assist service, we can augment your team with our experts, providing additional knowledge, experience, and capability—and peace of mind.