The Permian Basin in Western Texas and Southeastern Mexico is a 300-mile stretch ample with oil, natural gas and potassium. For the last 60 years, it also has been home to the family owned and operated McVay Drilling Co., which has supported its business, family and the communities in which it operates by contracting its rigs to clients looking to leverage the basin’s resources.
Headquartered in Hobbs, N.M., McVay operates six rigs in the Permian Basin. All are within 150 miles of McVay’s headquarters and within 100 miles of each other. Four of the company’s rigs have been in operation nearly as long as the company itself, but are constantly serviced, maintained and moved from site to site to drill new wells for its various clients.
Its two newest rigs were added to the company’s repertoire as McVay’s demand grew. Rig five has been in operation for five years, and rig six is only a year-and-a-half old.
“We opened the new rigs, and specifically rig six, because of the growth in demand,” President Mike McVay says. “At the time, we were turning down work and it was unfortunate because many of the clients were offering very promising jobs.”
Just as rig six was completed, the demand for oil slowed. In 2009, McVay only had two to three rigs operating at one time. In 2010, with the oil demand increasing, all of McVay’s rigs were back in the field, and many were operating as horizontal drilling rigs.
Horizontal drilling is a technique that McVay says has been steadily gaining popularity in the oil industry. He explains it’s a useful tool in drilling new plates throughout the country, but also for reentering previously drilled wells. Horizontal drilling, as opposed to vertical drilling, allows oil companies to retrieve more oil from its land. Instead of drilling downward 18,000 feet, McVay will drill vertically 8,000 to 9,000 feet and then drill horizontally another 4,000 to 10,000 feet.
“Horizontal drilling allows you to get into these zones of interest,” McVay says. “In modern times, you get to that zone and drill sideways, allowing you to get more oil out of the ground.”
The technique has been around since the 1920s, but McVay says the advances in technology over the last four years have made it faster and more feasible to drill horizontally. Now that technology has caught up with geological nature of areas such as the Permian Basin, oil companies are responding with a resounding yes to the option of horizontal drilling, despite the costs.
McVay says the upfront investment of a horizontal drilling well is nearly triple that of a traditional vertically drilled well. Even still, five out of six of McVay’s rigs are currently contracted to clients who have opted for horizontal drilling.
“The cost to build a horizontal well has gone up a lot this year,” McVay says. “I’ve seen them cost as much as $5 million, but the companies are able to produce more, even from the older fields, while drilling less wells. If you go horizontal, you don’t have to continuously move over and drill ten more wells. In that way, the owners feel they get five times as much oil out of the ground.”
In the next five to 10 years, McVay predicts that oil companies will continue on the trend of horizontal drilling going further and further to one side or another. If not, he says, McVay Drilling will evolve with new industry trends to serve its Texas and New Mexico markets. He says that while his operations have the capabilities to expand, Texas and New Mexico have been good to the company. It has found fairly steady work in these markets, especially in New Mexico’s Lea and Eddy Counties. Likewise, McVay Drilling has been good to New Mexico, as well.
“We are based in a very small community and our family running this business has supported the community for forever,” McVay says. “If one of our rigs goes down, at least 20 people are left without jobs, so it has not only supported the McVay family for 60 years, it’s helped the community as well.”