The pipe shortage evaporates as commodity tags take a nosedive

Dec 07, 2008 | 07:00 PM |

Plunging commodity prices spell trouble for a lot of energy drilling and exploration firms. But there is one silver lining potentially lower service and steel costs.

At a recent industry conference, a handful of drilling sector executives spoke with Perspectives. Some said pipe prices were coming down, others said that tags were holding steady.

But almost all agreed on this pipe is available ­­­­— and that's a huge change from the boom days of just a few months ago.

Steel pipe prices have come down significantly and quickly, and the declines will help reduce costs, said Glenn Darden, president and chief executive officer of Quicksilver Resources Inc., a Fort Worth, Texas-based oil and natural gas producer and veteran unconventional resource player.

"We're probably seeing steel off 20 percent easily, and we think it's going to come down a bit more than that on the pipe side," he said, citing fresh data from his operations team. "Realistically, we may see a 25-percent drop in steel prices this year on pipe."

"That's 25 percent down from 300 percent up," he told Perspectives on the sidelines of the conference. "But it's nice. Down is down."

And availability is no longer an issue, especially for the "plain vanilla" 5.5-inch pipe that accounts for much of the company's buy, he said. "It was real tight for a while," he said. "Now there is no talk about availability." Service costs are down by 10 to 20 percent, he added.....

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