When Red Fork Resources dropped two rigs in western Oklahoma, the completions schedule slid six months. Eight compressors that had been set for the new pads sat on location, on rent, compressing nothing.
The field office's instinct was to keep them. Releasing means paying to demob, then paying again to bring them back, and nobody wants to be the one who released the units right before they were needed.
The cost of waiting
Show the mathHide the mathHow each figure above is worked out, step by step.
Idle units cost$31,200
- Idle units cost a month8 units × $3,900$31,200
Already spent idle$62,400
- Idle units cost a month8 units × $3,900$31,200
- Spent idle so far$31,200 × 2 months$62,400
Releasing them saves$123,200
- Idle units cost a month8 units × $3,900$31,200
- Keep them until needed$31,200 × 6 months$187,200
- Release them now, bring them back later8 units × ($3,800 demob + $4,200 remob)$64,000
- Releasing them saves$187,200 − $64,000$123,200
Keeping them until they are needed costs $187,200 in rent. Releasing them and bringing them back costs $64,000 in demob and remob. The gap is the saving.
The break-even is the useful number
Demob plus remob per unit, divided by $3,900 a month in rent, gives a break-even of 2.1 months. If the units will sit longer than that, releasing them pays. If the rig could be back in a few weeks, keep them.
What made the call easy
Red Fork had a date. The completions schedule said six months, not "sometime next year". When the wait is a guess, run the calculator twice: once with your best case and once with your worst. If both say release, release.
- Idle units
- 8
- Monthly rental
- $3,900
- Months idle so far
- 2
- Months until needed
- 6
- Demob per unit
- $3,800
- Remob per unit
- $4,200