​Xtreme Drilling puts lighter rigs up for sale in reorientation to deeper US wells

Image: Xtreme Drilling

Since its sale of coiled tubing assets to Schlumberger last year, Calgary-based Xtreme Drilling has focused on deeper U.S. plays for its premium spec 850XE Evolution drilling rigs.

Its lightest XDR 200 and XDR 300 rigs have been put up for sale.

Xtreme’s first 850XE Evolution series rig—a high-tech 1,800 hp unit with a maximum hook load of 850,000 lbs.—was signed earlier this year to a two-year contract and scheduled for delivery to Oklahoma in the fourth quarter of 2017.

In July, Xtreme finalized 18-month term contracts for its remaining two 850XE Evolution drilling rigs, both with the same customer in the Utica play of the Appalachian Basin. They are expected to go into operations in 4Q17 and 1Q18.

Xtreme estimates the incremental revenue from all three of its 850XE Evolution rig contracts to be more than US$24 million in 2018 (the estimated cost to build each rig is approximately US$16.2-$17.0 million).

“The three 850XE contracts validate the strategy to up-grade a portion of our legacy drilling fleet with a new super-spec rig design and proprietary technology,” Xtreme president and CEO Matt Porter said in a statement with the company's second quarter 2017 results.

“Our customers realized the potential to decrease their full-cycle drilling costs through the 850XE rigs unmatched efficiency and technical capability.”

Xtreme has also recently finalized new term contracts on two XDR 500 rigs in the DJ Basin of Colorado. These contracts will extend these two rigs through October 2018 and January 2019.

Xtreme currently has eight of its 10 XDR 500 rigs operating with the ninth XDR 500 contracted and anticipated to commence operations by the end of July.

Apart from one XDR 200 rig currently operating in North Dakota, Xtreme has evaluated the market in Canada, the U.S. and internationally for its smaller rigs and decided to sell four XDR 200 and four XDR 300s.

It expects to complete the sale of these rigs within one year, although “the recent volatility in oil prices has slowed the process to sell these non-core assets,” the company said.

On a go-forward basis, Xtreme will operate a fleet of 10 XDR 500 rigs and three 850XE rigs.

Xtreme posted Q2 revenue of $15.1 million, 70 per cent rig utilization and a net loss of $48.4 million.

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