Rig manufacturers scramble to keep up with energy boom

STERLING, Colo. — On the prairie of northeast Colorado, Roger Stumpff stands in a muddy lot and looks at the pieces of a giant blue-and-white drilling rig that have become the heart of his business.

Decades ago, Stumpff's Industrial Welding & Supply spent most of its time building parts for the surrounding farming community; today, it's nearly all oil-and-gas work, as much as the small company can handle.

Stumpff has nearly doubled his work force to 77 employees, and crews work long hours piling up overtime building mud tanks and other parts for drilling contractor Ensign USA. Still, he says, "We're not nearly big enough to do everything."

The energy business is booming, particularly in the Rockies, but there is a shortage of rigs. Companies are looking abroad and contractors are scrambling to build new rigs by salvaging parts from scrapped, aging equipment. And for the first time in decades, they are building new rigs to bore deep into the earth.

It is a gamble for those who can invest upward of $20 million in a single rig, keeping an eye on natural gas prices as they work to line up multiyear leases. Many recall the oil bust of the 1980s when their useless rigs were stacked across the country.

"For most of the '80s and all of the '90s and the first part of the 2000s, the industry economically could not afford to make this type of investment," said Richard Mason, publisher of The Land Rig Newsletter in Lubbock, Texas. "We've entered a new era here. This is the first major retooling effort in 30 years."

In Gillette, Wyo., Patrick Hladky of Cyclone Drilling Inc. said he can't keep up with the demand for his 25 rigs, fielding calls from as many as seven different companies in one day.

"It doesn't matter where you're at, they need rigs," he said. "Everywhere there's a drilling rig standing, there's one that's needed."

With its fortunes tied to the energy price roller coaster, the U.S. rig manufacturing industry long dominated the global market after World War II. It reached a U.S. high of 4,530 rigs in service in December 1981 during the height of a boom, according to Houston-based Baker Hughes, an oil field services company that has kept track of the count since 1944.

When prices fell and production plummeted, demand dried up and left contractors with thousands of rigs that were stored or sold for parts or scrap as many companies went bankrupt. The U.S. rig count dropped to its lowest point of 488 on April 23, 1999, Baker Hughes said.