In the current oil and gas market, operators are finding it ever harder to balance production costs with profit. Market forces are in play that means it is unlikely that the drilling industry will ever match its heyday profits. In this post, we want to look at how purchasing refurbished rig equipment can help somewhat. By delivering a much lower cost of ownership, while maintaining high standards of manufacture.
But it isn’t just price that makes used drilling equipment an attractive option. There are several other major benefits to be had as well. For example, those listed below.
In the sections below, we will look at each of these benefits a little more closely. If you have any questions related to these benefits, you can contact our team. They can help you further.
The major incentive for buying used drilling equipment is, of course, the lower price compared to buying new. Few industries face such high costs for purchasing equipment needed for production and delivery of the raw product as the oil and gas industry. In recent years, falling oil and gas prices combined with increased operational costs have cut profit margins. Buying used rig equipment where appropriate, is an effective way to claw a little of those lost profits back.
Keeping a rig running, or recommissioning one that has been mothballed, can often mean waiting on long lead times for critical equipment. Manufacturers of expensive items simply cannot keep large numbers of high ticket price products in stock.
This is not so with refurbished drilling equipment. In almost every case, the product will be sitting, waiting to be sold. Ready to be shipped straight away, anywhere in the world (sanctions allowing). Meaning that lead times are generally far lower than when buying equivalent new equipment.
If faced with the purchase of an expensive piece of equipment, what options are there to lower the price? Many manufacturers have their corner of the market neatly tied up. Meaning their prices are pretty much locked. There is very little room for negotiating a better price in these circumstances.
One option, is to consider buying roughly equivalent items made by a cheaper manufacturer, likely from China. But is this really a cost saving? Lower quality, higher failure rates and increased maintenance costs could swallow up the initial saving very quickly.
Another option, is to purchase refurbished rig equipment. In most cases, the price would be well below buying a new piece of equipment of Chinese manufacture. In effect, giving the best of both worlds. A vastly lower purchase price, but with trustworthy, Western standards of manufacture, and decreased maintenance costs.
In most cases, a piece of used drilling equipment will have been completely overhauled as part of the process of getting it ready for resale. This refurbishment is usually undertaken by the Original Equipment Manufacturer (OEM). Or by an American Petroleum Institute (API) registered service company.
Furthermore, where appropriate, the item is then inspected, tested and certified. In effect, the unit is almost as good as when it was manufactured, but available immediately. And at a fraction of the price of buying new.
We have already touched on the fact that lead times for purchasing used rig equipment are basically zero. This also provides another benefit as a byproduct. The item will be sitting, waiting for sale, ready to ship. Meaning that it is also ready for inspection and viewing. Certainly, with the products we have for sale, we can arrange viewing very quickly indeed. Of course, the ease of viewing will depend upon where you, the purchaser, is located.
Every item that is manufactured imposes a cost on the environment. The manufacturing process will undoubtedly have a measurable carbon footprint. It would also produce harmful waste.
However, buying refurbished rig equipment lowers this environmental cost. In some cases, it could completely negate the environmental cost of the initial manufacture of the unit.
With global sentiment related to environmental issues running higher than it ever has in the past, this has to be a purchasing consideration. Being able to source replacement equipment that has a far lower impact on the environment can be seen as a positive thing.
At the time this page was written, we were in the process of finalising the sale of a refurbished drawworks. When originally purchased, this particular drawworks cost over $1.5 million.
We procured this as a used unit, and have overhauled it. Our sale price for this piece of equipment was under $200,000. The client will have to spend in the region of $350,000 to bring the unit into production. However, this still represents a cash saving of around $1 million.
And remember, this is a western quality piece of equipment, not a cheaper alternative produced in China. Looking at the shape of the oil and gas market today, what producer would not want to save $1 million if they could?
The sale of older rig equipment isn’t just one way. There is potential value in any equipment that is no longer needed. We are always happy to look at any used equipment that is available. With a view to purchasing it to refurbish and sell on. This further reduces operational costs. In some cases, the sale of disused equipment could potentially fund the purchase of refurbished drilling equipment that might be needed.
We understand the challenges faced by oil and gas operators who need to maximise efficiency, while reducing running costs. In this post, you have already learned about the many advantages that buying used drilling equipment can provide.
Now, we want to tell you about our value-add. When you purchase from us, we will make the entire end-to-end process extremely simple. Whether you want to view a piece of equipment, or purchase as is, we will streamline the experience.
You will find that we always do business in a trustworthy, ethical manner. And that when we say we will do something, it gets done. Our entire team has each spent decades in the oil and gas industry. The knowledge and experience they have accrued, is yours to exploit. They are capable of helping you to make smart purchasing decisions, and save on operational costs.
If you would like more help and advice about the benefits of buying refurbished rig equipment, or are interested in finding out what we have in stock, please contact our team. You can do this directly by calling us on +971 6 526 2556 or by emailing them at sales@irefzco.com. You can also use our contact form to make a general enquiry, and we will contact you back.
By Mac Wheeler
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