Cactus Drilling Company LLC

Cactus Drilling Company, LLC stands as a U.S. leader in contract drilling, but it would not be there without its strong focus on employees and customers, Vice President of Operations Josh Simons says. “We recognize that we’re in the people business,” he says.

“The relationships we’ve built with our customers at all levels of the organization have been vital to our success,” he continues. “We strive to provide maximum value for each of our clients.”

The origin of Oklahoma City-based Cactus dates back to the 1970s, when it started as Cactus Drilling Corporation, which operated for several years before its assets were purchased by Kaiser Francis Oil Company (KFOC) in 1992.

This marked the entry of former president Jim Willis, who was a long-tenured executive with KFOC and led Cactus until his retirement in 2011. “Jim was a visionary businessman and held the original assets acquired in ’92, and purchased additional assets at depressed prices throughout the late ’80s and ’90s,” Simons says.

In January 2000, Willis teamed up with Cactus’ current president, Ron Tyson, to launch Cactus Drilling Company. “During the ensuing two-and-a-half years, we built and operated 20 rigs utilizing our previously acquired assets,” Simons says.

In August 2002, the company sold those assets to Unit Drilling. “With a handful of employees and plenty of drilling equipment remaining, we fired up again almost immediately, and the current incarnation of our organization, Cactus Drilling Company LLC, was operational by the summer of 2003,” Simons says.

100 Percent Utilized
Today, Cactus operates a fleet of 58 rigs. Thirty-three of them, Simons notes, were built using a combination of new and refurbished equipment, with the latest 25 being advanced technology new builds.

“Rig by rig, our company has grown to over 1,500 employees and we are now the largest privately held domestic land drilling contractor in the United States,” Simons says, noting that the firm celebrated its 10th anniversary this summer.

Its modern rig fleet enjoys consistently high utilization. “We’ve been at or just below 100 percent utilization since 2011, and are currently 100 percent utilized,” he says.

The firm also continues to capture market share. “We’ve achieved a 35 percent increase in active rig count since the October 2008 peak in U.S. land rig activity,” Simons says. “Many of our larger, publicly-held competitors have experienced a significant decrease in active rigs during the same time frame.”

Its customers consist of a mix of large, public exploration and production companies, including Devon Energy Corp., Newfield Exploration Co., Cimarex Energy, XTO Energy Inc., Apache Corp. and EOG Resources Inc. “Those are among many other reputable operators that we’re fortunate enough to have aligned ourselves with,” Simons says.

Cactus is somewhat selective about who it does business with, Simons says. “We prefer to align ourselves with operators that have similar expectations regarding safety-leadership and operational excellence,” Simons continues. “We strive to partner with companies whom with we can build strong partnerships and long-term, productive working relationships.”

Cactus is currently operating in Oklahoma, Texas and New Mexico in the Anadarko, Ardmore, Permian and Western Gulf basins, Simons says. Its shale play activity includes the Cana and South Central Oklahoma Oil Province (SCOOP) in the Woodford shale, as well as the Mississippian and Eagle Ford shales. “All are drilling for oil and liquids-rich gas,” he says.

A Fine Fleet
Cactus’ 58-rig fleet consists of two mechanical rigs, 31 Tier 2-B, SCR conventional rigs, 20 Tier 2-A SCR Rocket Rigs and five Tier 1 AC Rocket Rigs, Simons says. “We specialize in 1,500 horsepower rigs, with 85 percent of our fleet in that power range,” he states.

Each of its 1,500-hp rigs, he notes, is equipped to handle horizontal/directional drilling applications and extended reach laterals. Additionally, all are equipped with top drives and iron roughnecks.

The company also has implemented additional technology to the majority of its rigs, including BOP handling systems and hydraulic catwalks. “We intend to continue to implement these technologies at a rapid pace. The next step change for us is automated pipe handling, for which we currently have one system in operation with plans to install on additional existing rigs as well as all new builds going forward,” he says.

Crucial Advantages
Cactus’ status as a privately held firm allows it to be more nimble in regards to decision-making than its competitors, Simons says. “Our lean and flat organizational structure allows us to move on issues quickly and decisively, which gives us a competitive advantage over larger companies with more complex processes,” he says.

The firm also distinguishes itself with the philosophy that it is in the service business, he says. “We understand our role and highly value operational and safety performance,” he declares.

Cactus also maintains a “family” culture within its workplace, Simons says. “Many companies frequently use that line, but we live it,” he asserts. “Just ask our employees.”

Most importantly, he says, Cactus recognizes that having strong leadership and the right people in the right positions are crucial to its survival. “We have some of the best iron in the business, but even the most advanced rig in the world will fail to perform if it lacks strong leadership, good crews and a dedicated support staff,” he says.

Cactus also strongly values its relationships with its vendors and suppliers, Purchasing Manager Brad Abretske says. “We work hand-in-hand with quite a few of them so they understand our needs, [such as] what kind of stock they need to maintain to serve us better,” he says.

Establishing the relationships with both groups has been helpful, particularly during times when Cactus needed parts and rigs were down. “They came through for us,” he says.

Abretske adds that Cactus will soon enhance its relationships with suppliers with the implementation of a new comprehensive inventory and maintenance system. With the new software, the company will be able to create and distribute purchase orders, as well as set automatic re-order points.

The documentation will help ensure that Cactus’s rigs are getting the parts they need at the right time. Abretske notes that the company will benefit greatly from the new system.

“The sheer volume of what we purchase and receive to maintain 58 drilling rigs [can be challenging],” he says. “But I’m confident the new program will streamline our processes and enhance efficiency.”

A Booming Business
In the past two months, Cactus’ market has looked strong as operators have finalized their 2014 drilling budgets, Simons says. The company has received numerous requests for 1,500-horsepower rigs for projects in the final quarter of 2013 and the first quarter of 2014, predominantly in the Eagle Ford, Permian and Woodford plays.

“Additionally, new-build inquiries for 2014 drilling projects have increased,” he says. “We’ve experienced very little rate pressure and spot market pricing remains firm, and new-build pricing and contract terms remain attractive.”

Well complexity also has skyrocketed, with horizontal and directional wells accounting for 75 percent of the U.S. drilling activity, Simons says. “Those projects require 1,500-horsepower-class, advanced rigs with top drives and electronic drilling controls,” he says.

But when one part of a market goes up, another must go down. According to Simons, the activity of lower horsepower rigs continues to decline, particularly in the Permian Basin, where operators are running out of vertical well inventory.

Setting New Standards
Extended reach laterals are also becoming progressively longer, Simons declares. “The main challenge is that these wells require substantial pipe racking capacity, so we’re upgrading our existing rigs to accommodate as needed,” he explains.

With these changes, many of the rigs will have upwards of 25,000 foot racking capacity. “That will be standard on all new builds going forward,” he says.

Cactus’ industry also has moved towards 7,500-psi high-pressure mud systems. “We are upgrading several of our existing rigs with high-pressure fluid ends and discharge piping,” he says, noting that this also will be standard for Cactus going forward.

The contractor is upgrading its existing rigs to accommodate multi-well pad drilling, which has become increasingly popular as operators have moved from being held by production programs to field development. “Currently, 31 of our rigs are pad-capable with an additional four upgrade projects planned for execution within the next 60 days,” he says.

Enhanced Performers
Another industry change that Cactus is adjusting to is the replacement of older, conventional mechanical and SCR rigs with Tier 1 AC advanced technology rigs. The new rigs, Simons explains, provide enhanced performance, which allows operators to drill more wells with fewer rigs.

The company’s 25 Rocket Rigs are engineered to meet the current and anticipated market demands, including increased well complexity. “We are committed to and focused on innovation and technology, and have continuously upgraded our new build designs to accommodate current and anticipated market demands,” Simons says.

Getting Faster
Cactus has placed a stronger focus on decreasing its mob times, Simons says. “Obviously, as an operator, you want to decrease the release to spud cycle,” he says. “All that non-productive time is lost drilling time.”

In early March 2013, Cactus began an initiative to increase its rig move performance. “Prior to that initiative, we had an average fleet move time of 7.35 days,” he says.

But since then, the company has enjoyed substantial improvements. “Through November 2013, we’ve reduced our fleet-wide mob average to 4.95 days, with late model Rocket Rigs averaging 4.25 days and several accomplishing mobs in 3.5 days or less.”

Cactus achieved these improvements through the help of Check 6 Logistical Solutions, “an organization of retired military personnel,” Simons says. “They’ve helped us apply a military-based approach to planning of the rig move process.

“There are identifiable similarities between our business and military operations,” Simons says, noting that both deploy people and equipment to various locations. “They have to get from point A to point B in a certain amount of time, and often under much more critical circumstances.”

Although Cactus understood how to move its equipment, “Where we weren’t excelling was in the planning process,” he admits. “[Check 6] has helped our field-level leadership with proper planning and scheduling.”

Sharp People
A 13-year veteran of Cactus, Simons started at the company when he was in college. At the time, “All I needed was an opportunity to earn some extra money during Christmas break,” he recalls. “I interviewed with our president, Ron Tyson, and immediately went to work in the rig up yard as a yard hand.

“I really enjoyed the work and was fascinated with the business, and thankfully earned a part-time position while attending college. In the summers, Ron Tyson gave me the opportunity to roughneck,” he recalls. “When I graduated from college in May of 2003, he made me an offer to come work full-time and I’ve been privileged to be a part of the growth of this organization ever since.

“It’s been a great experience,” he continues. “I’ve been fortunate enough to work with and learn from some very visionary business people with strong leadership qualities.”

Abretske, who has held his current position at Cactus since 2010, agrees that the people and culture have kept him with the company. “Ron Tyson … has really developed a great corporate culture here,” he says. “I couldn’t work with a better quality [of people].”

Many of Cactus’ employees carry extensive industry experience. However, “We have a very youthful employee base,” Simons says. “Fortunately, we’ve been able to attract and recruit some really sharp people.”

Quality over Quanity
Going forward, Cactus will follow a growth strategy that is completely market driven, Simons says. With its privately held status, “We don’t have shareholders to impress,” he says. “As the market demands additional rigs, we’ll build them.”

He notes that the company will soon grow its fleet. Cactus has two new rigs scheduled to arrive in the first and second quarter of 2014, with potential for two more to be delivered in the third and fourth quarter.

However, “At Cactus, we value quality over quantity,” he asserts. “We don’t want our rig count growth rate to outpace our ability to develop and recruit strong leadership to operate additional rigs at the level of safety and operational excellence that both we and our customers expect.”