Ensign's ADR reduces well costs for resource plays

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Faster drilling times and reduced drilling costs: this is what drives the Drilling Divisions within the Ensign Energy Services Inc. group.

"We cut costs by providing higher efficiency. That is a value differentiator," says Ensign President and Chief Operating Officer, Bob Geddes.

With a global reputation for excellence in providing energy industry services, Calgary headquartered Ensign (TSX: ESI) is the largest oilfield services company in Canada. Ensign operates an extensive equipment fleet of more than 300 drilling rigs in 12 countries worldwide, and approximately 120 service rigs in Canada and the U.S. The company works hard to maintain the highest standards for safety and environmental stewardship. And over the years, Ensign has made advancements in drilling and well servicing through the innovative use of technology, carefully listening to customers in order to better understand industry challenges, and then capitalizing on strategic opportunities.

Ensign was one of the first drilling contractors to really understand that rig technology must keep up with advances in drill bit technology, which took a giant leap forward six years ago with the introduction of the Polycrystalline Diamond (PCD) bit. Early on, Ensign began constructing rigs that would maximize the benefits offered by this new bit technology.

"We designed rigs that put an even 'weight on bit' distribution - versus most typical rigs in the world with drum brakes, which provide an uneven weight on bit," Geddes says. The advent of AC drawworks and hydraulic units culminated in Ensign's Automated Drilling Rig (ADR)T design, which reduces both drilling time and well costs. Ensign currently operates 60 ADRs worldwide.

Repeatedly, the ADRs have proven themselves to be in a league of their own. In one typical example, Ensign was able to reduce net well costs by 25 per cent by co-ordinating a purpose-built ADR for a resource play for one of the oil and gas majors.

In another example, Ensign recently delivered five ADRs into the Middle East. The first well that was drilled, tied the national record for spud to total depth. The second well beat the record, and Ensign has been setting records there ever since.

In the past 10 years, operators have incurred the largest cost inflation in the areas of mobilization and completion costs. Over the same period of time, drilling rig costs have only increased by four per cent on a 'per well' basis. "The technology that our rigs have brought to the table, is providing real savings to oil and gas producers," Geddes says.

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The people at Ensign pride themselves on being able to work closely with customers to design and build rigs that will fit their needs exactly. Ensign sits down with many of its clients and asks, "What is the perfect rig in your mind?"

To better respond to customer requirements, Ensign operates its own Engineering, Procurement and Construction (EPC) group, which can purpose-build and design rigs using the latest technology. "The key, is that we get very aligned with our customer," Geddes explains. "The customer buys a resource play thinking he's going to be there for 10-20 years. Why not construct a rig with the same thought, and build the most efficient machine that will live with the project." Using this approach, Ensign's EPC group has built approximately 50 rigs in the last 10 years, with another six ADRs now under construction with deliveries scheduled through late 2010-2011.

Ensign is also starting to expand its directional drilling business, where the technology is now off-the-shelf and commoditized. Ensign's vision is to complement its current business with drilling rigs that will go in any direction you want them to go. Seventy per cent of all wells drilled by Ensign rigs now include a directional component. "It makes sense - it becomes part of the process," Geddes says, noting that directional drilling makes up a large part of what companies now require. Going this route "saves a couple of people on location, it drops their directional drilling costs, and it's where the business is headed." Ensign, which operates at least 10 rigs on any given day in the U.S. that offer this service, will be rolling out more of its directional drilling service in Canada through the year - further reducing operating costs for customers.

The Western Canadian Sedimentary Basin (WCSB) is one of the highest cost basins in the world to produce. "So we have to be very much aligned with our customers, and Ensign will continue to push the technology. A lot of new technology comes out of Canada for a reason - the WCSB is one of the toughest basins to produce from."

This is a very competitive market. And the companies that bring forward cost cutting solutions for their customers, are those that will flourish. This is what Ensign is all about: innovative, cost-effective drilling, that allows operators to cut their net well costs and drill more wells.

For more information, contact:

Rick Simonton, VP, Canadian Drilling Sales and Marketing
Ensign Energy Services Inc.
T: (403) 262.1361
F: (403) 265.7673
W: www.ensignenergy.com