You may have read or seen on the news that last February’s intense cold had shut down dozens of petrochemical plants in Louisiana and Texas. Before that, Hurricane Laura caused reduced production in factories in Mexico. And of course, COVID-19 has had wide-ranging effects on everything from client relations to freighting materials.
But how does this affect horizontal wells – or any sort of well, for that matter?
Among the industries severely affected by the weather and the pandemic has been plastic production. The major manufacturers of the resins used in all plastic products, including PVC and HDPE well materials, are located in the Gulf states, in the heart of the manufacturing slump. As a result, their production has been significantly reduced, backlogs have increased, pricing has climbed, and availability is often short.
In estimating for projects and buying materials for contracted projects, we’ve found that pricing has greater than doubled for HDPE and PVC; further, our vendors will not lock a price for us for more than a few days. Availability has also become more crucial for projects – while we could reliably order materials about three weeks in advance with confidence that the well screen and casing would arrive to the site on time, we now try to order at least six weeks, and earlier if we can, in advance. Even then, we sometimes need to either call multiple vendors – or our primary vendors need to contact multiple distributors – to find what we need, when we need it.
The story is similar for stainless steel, which has had fluctuating prices and availability for over a year> This is in part due to trade issues with China, the source of much of the stainless steel on the market.
For our valued customers, we are trying to hold the line on pricing for existing contracts. For cost estimates that we provided months ago, if your project starts to move forward, please contact us to see if we need to update the price before issuing a contract. We will do our part to share the burden of these price increases. And, if you contact us to provide a cost estimate for a new project, please be aware that we will likely hold our pricing for labor and services for an extended time, but will ask for the opportunity to get revised quotes from our vendors just prior to placing materials orders. And please give us as much advance notice as possible on when you plan to start your project so we can maximize the delivery time.
Thanks to our clients’ efforts, Ellingson-DTD weathered COVID-19 delays and shutdowns with relatively minor ill effect. As a critical business, our drills thankfully kept turning through the worst of the shutdowns. Again, with our customer’s patience and cooperation, we will get through this next set of inconveniences as well!
On the brighter side, if you happen to be a day trader, we have one word for you: “Plastics.”