As long as there are oil wells—greenfield and brownfield—there will be a need for downhole tools. That much is unchanging. What is up for grabs is the kind, the number, and the speed at which they’re needed. For Ruger Oil Tools, the times they are a’changin’. For Mesquite Oil Tools, the more things change, the more they stay the same. And for market research company Straits, the demand for newer and faster tools is driving M&A activity that is changing the landscape across the Basin and the world.
Ruger Oil Tools Founder and Owner Travis Hale took his first oilfield job at the tender age of 17, requiring his father to sign a waiver because of Travis’s youth. He’s worked with tubing and downhole tools since 2010, for both operators and service companies. Hale started Ruger Oil Tools in September of 2022, after selling a previous through-tubing company he’d started with partners a year earlier.
While Ruger works both on completions and production, Hale says right now “Probably 90 percent of our work is devoted to through-tubing.”
Having seen the company’s business mushroom by about 300 percent last year, Hale describes his success formula as containing three main components. “You’ve got to have the big three. You’ve got to have an agitator that can make it to the bottom on a coiled (tubing) unit; you’ve got to have a motor that can hold up to that agitator; and you’ve got to have hands out there that know what they’re doing. I’m very blessed to say that I have all three of those in my arsenal.”
Keeping all those components in line is a challenge in 2024, and he says today’s breakneck speed required by many operators keeps him and his people on their toes.
Nothing Is Constant Except Change
“What we started with three-an-a-half years ago, to what we’re running today, they’re not anywhere near the same,” Hale said. Some of the change he attributes to simply seeing and taking advantage of new opportunities.
But the biggest change is in the demand for speed coming from the marketplace. Clients “push a lot harder on their procedures, asking for speed.” That puts stress on both the equipment and the people compared to how it was when Hale started in tubing in 2010.
“Then we were doing 2,500-foot laterals and 20 plugs in a well, and now we’re doing three-mile laterals with 100 plugs in a well. Then it took 36 hours to do it, now we’re doing three miles and 100 plugs in the same time frame,” he said. In today’s market, “It’s all about speed, cost, and price per hour.”
Harnessing Technology to Stay Ahead
Hale says a decision to go all-digital from the beginning is paying off as the need for speed increases. He benefits from “being able to create jobs, move jobs, and being able to see what my guys are doing out in the field. I feel like we’re moving more and more to a technology-driven industry, and that was something I saw a need for on our side.”
With everything online he can check a job and track assets if he’s in a meeting in Houston or track assets “at any given time.”
Pluses and Minuses of M&A
The flurry of mergers and acquisitions over the last 12 months has been a mixed blessing, Hale said. When two companies come together, either of two things happen—good or bad. On the good side, Hale recalled when a company that was a Ruger client bought a company that wasn’t a client. Ruger gained the equivalent of a new client in the merger.
But it can work the other way as well. At this writing Hale was waiting to see how things were to shake out in another merger involving one company that was a Ruger client and one that was not. “We figure we have a 50-50 shot,” he observed.
The More Things Change….
While Hale and his Ruger team are seeing change sweep across the flatlands of the Permian Basin, Manager Shawn Moreland of Mesquite Oil Tools, based in Snyder, says the company has held blessedly steady through the turmoil of the last four years. “Through COVID I would say that it slowed down a little bit, but it never really stopped for us. Our deal pretty much stays steady.”
Moreland says Mesquite’s main work involves completions and workovers because, even in a downturn, “They’ve still got to keep these [existing] wells going.” Casing leaks in producing are among the most common calls. “That’s the thing about us being in the tools business. For us to be busy they don’t necessarily have to be drilling, because there are so many existing wells that they still have to work on.”
One difference Moreland has seen is the exponential growth in the depth of wells and length of laterals, along with a reduction in the size of downhole tubing.
Because of the smaller outside diameters (OD), he said, “They have more bypass around the anchors, plus they get more gas bypass. So you see a lot more slimline stuff, including the anchors.” Anchors they supply now come from California.
And for laterals, “They’re going a couple of miles down, then a couple of miles [or more] out.”
He acknowledged that the rush of M&A activity can make any given morning a brand new scenario if a current client buys, merges, or is bought, but so far they have been unscathed by the heightened transaction count.
In supply chain issues, Mesquite is turning inward for some solutions, stocking up on some items when they’re available, and relying on their in-house machine shop with computer lathes for some items. “We can make our own profile nipples and landing nipples and things like that. It really helps us out when we need specialty stuff and we can’t get another machine shop to do it in a timely manner and we’re out on a well and need something right now,” he said. For a rush, on-the-well emergency, an external machine shop, as he pointed out, would charge expeditingExpectations for the rest of the year are for continued stability fees, so having their own option saves money as well as time.
Moreland said. “All signs point that way, anyway.”
The Future for the Oil Tools Market
Instrumental in both drilling and production, global intelligence firm Straits Research sees the global downhole tools market expanding through 2030. As the world’s most productive basin, a significant portion of this market happens in the Permian Basin.
In a report entitled, “Global Downhole Tools Market Size is Estimated to Reach USD 6.87 billion by 2030, Growing at a CAGR of 5.23, Global market intelligence firm Straits Research reports, “The global downhole tools market revenue was valued at USD 4.13 billion in 2021 and is projected to reach USD 6.87 billion by 2030 at a CAGR of 5.23 percent from 2022 to 2030.”
The company sees some of the growth spurred by the fact that downhole tools companies are developing new hardware geared toward reducing mining expenses by taking over many formerly human tasks and accelerating operations. Many are using automation to speed rate of penetration (ROP) to help producers monetize assets more quickly and to reduce the number of days that crews and machinery are onsite. Speed will be created because the automated equipment “is anticipated to meet the challenge of effectively following a prescribed downhole route,” creating predictability across wells and basins.
Multinational corporations are strengthening their places in the market through both innovation and M&A activity, the report said. Among recent significant moves among companies active in the Permian Basin:
- Baker Hughes announced in March 2022 that it had acquired Altus Intervention, a 40-year-old international provider of well intervention services and down-hole oil and gas technology.
- In April 2022, Schlumberger acquired 16 firms and invested in 25 others. The company has spent more than $27 billion on acquisitions. Schlumberger has invested in numerous industries, including oil and gas technology, smart grid technology, and smart cities.
- In January of 2022, the world’s largest oilfield contractor, Schlumberger, was preparing for global expansion, anticipating that several years of crude-demand growth will be sparked by recovering economies.
The other side of this growth will come from the fact that demand for oil and gas will continue to grow, at least through 2030, said Straits, in spite of energy transition efforts to wean off of fossil fuels. The company sees the demand for drilling and completions to continue to be strong through 2030, the timeframe of this report.
Paul Wiseman writes in the oil and gas sector. His email address is fittoprint414@gmail.com.