From the March edition of The Land Rig Newsletter:
Top drive costs are rising as suppliers scramble to keep up with demand for this critical component amid an embryonic newbuild surge driven by the unconventional drilling boom.
Suppliers report growing backlogs and wait lists for both sales and rentals in line with growing demand spurred by accelerated drilling in unconventional resource plays. Top drives are considered an essential component for the >1,000 hp rigs that dominate U.S. unconventional drilling these days. At the same time, growing demand in the international market—in particular Russia, Latin America, and the Asia Pacific region—is adding to supply pressures. However, pricing is better in North America relative to an international market dominated by term contracts.
Tesco, for example, reports an increase in its current backlog of top drive orders to 30 from 25 at yearend 2010—including 22 new orders. That compares with a backlog of only 11 at yearend 2009. Tesco expects to produce 6 to 8 units per month this year compared with 4 to 6 units per month last year. About half of its orders are for newbuilds and half are for retrofits. The company also expects to expand ...