Why Offshore Drillers Need Artificial Intelligence to Remain Viable

Robotics are making headlines these days, and the drillers should be paying attention if they want to be more profitable.

John Licata
John Licata
Apr 26, 2014 at 1:24PM
Energy, Materials, and Utilities

Speaking recently with contacts at Reuters, I was reintroduced to Schramm, a company tapping innovation in advanced robotics that can literally move an oil rig from drill hole to hole -- yes, a walking oil rig if you will. Since reviewing the recent strides, no pun intended, Schramm is in fact making drilling faster, quicker, and even safer. I can't help but think Transocean (NYSE:RIG) and Nabors Industries (NYSE:NBR) need to be paying much more attention to new technologies since the advancement of robotics and artificial intelligence (AI) will likely disrupt their business models. 

Between the two names, I do believe Nabors is embracing new technology and innovation in drilling more than Transocean. For instance, the company has been tapping software to boost drilling efficiency in a move to elevate safety by automating more and more of its drilling process. With that said, Nabors has the largest onshore rig fleet. Transocean has the opportunity to tap unmanned robotics to modernize its offshore rig fleet, especially since companies such as Apache, Statoil (NYSE:EQNR), and National Oilwell Varco (NYSE:NOV) are increasingly seeking higher alpha in remote offshore locations, areas typically extremely dangerous for human workers. 

Cutting costs and boosting efficiency are major focal points for E&P companies trying to offset risk and safety concerns from hazardous but also rewarding exploration opportunities. Rig makers should look to adopt and possibly outright acquire the companies and the IP that are challenging their future way of doing business, especially since robotic rigs may help drive rig day rate costs down substantially in years to come. 

Considering there is plenty of rig availability these days from Transocean, Hercules Offshore, and Diamond Offshore Drilling, E&P companies clearly are delaying projects and holding out for more efficient rigs that are less expensive. This should serve as a wake-up call for rig makers that the old way of drilling needs to be modernized. 

The oversupply of rigs will likely reverse in the next 24 months, but innovation may help redefine what is needed from customers by then. That means Schramm, along with companies like Robotic Drilling Systems (unmanned land and deepwater industrial robot) and Drilling Structures International (walking systems), could be all be acquisition targets of rig makers. That is, if they aren't already.