Tulsa, Okla.-based Unit Drilling Co. operates 128 onshore drilling rigs in a number of regions, including this 1,500-hp diesel-electric rig located near Pinedale, Wyo.

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Quadrupling in size in eight years is no easy task, but that’s just what Unit Drilling Co. has done. The Tulsa, Okla.-based drilling company was founded in 1963 with just three drilling rigs. By 2006, the operation was one of the largest onshore drilling companies in the United States. With its subsidiary, Unit Texas Drilling LLC, Unit Drilling operates 128 onshore drilling rigs in the Anadarko and Arkoma Basins, the Rocky Mountains, and the Texas and Louisiana Gulf Coast.

Unit Drilling’s rig fleet – located in the major U.S. onshore drilling markets – drills for natural gas. The company says it is ideally positioned to benefit from the expanding domestic natural gas market. Its average rig utilization in 2006 was 96 percent, it notes.

Strong Foundation
In 1963, King Kirchner and Don Bodard purchased Unit Drilling from the Woolarc Oil Co. At the time, the company was made up of three rigs designated for drilling oil and natural gas wells. A year later, the company purchased four rigs from Texas-based Falcon Seaboard Drilling Co. and continued to expand.

Unit Drilling purchased four more rigs in 1974 to keep up with increased demand. Five years later, the company added exploration and production divisions, and went public. When the price of oil doubled in 1980, Unit Drilling bought five rigs to meet the drilling boom. The next year, the company shifted from over-the-counter trading to being listed on the New York Stock Exchange.

In 1988, due to its growth and diversification, Unit Drilling established a subsidiary, Unit Petroleum Co., to carry out its oil and natural gas exploration operations. Unit Drilling, on the other hand, focused on contract drilling service. Unit Corp. is the parent company to both operations. Growth and acquisitions continued for the next 12 years, and by 2001, Unit Drilling had a total of 55 rigs. Today, the number of rigs has more than doubled – to 128.

Executive Vice President John Cromling says one of the company’s biggest highlights was in 1998 when it made its first acquisition. “It was the beginning of the growth pattern that’s been happening ever since,” he explains. “In 1998, we had 25 rigs, and now we have 128. It’s been very rapid.”

Cromling says acquisitions are the company’s primary growth method because building rigs in-house is a slower process. “When you acquire a company, you get not only the rigs, but the people and the business,” he says. “Having that support and structure already in place is important.”

Strong Strategy
Unit Drilling says its corporate strategy is to:

• Improve market share and rig utilization, and develop new markets
• Grow its reserve base by more than 150 percent of annual production “with acquisition costs meeting or exceeding our economic parameters”
• Maintain a conservative debt position and enhance its financial strength

From a contract drilling standpoint, Unit Drilling says it strives to provide high-quality drilling equipment and service; retain key personnel through “consistent, maximized rig utilization”; and expand its operational areas and rig fleet.

Unit Drilling’s exploration and production strategy involves focusing on low-risk exploration and development drilling; driving reserve growth through internally generated prospects; adding new reserves in excess of 150 percent of annual production; achieving a minimum 15 percent rate of return and staying alert to potential acquisitions.

Finding the Best
A common problem for many industries, but particularly the oil and gas industry, is finding and retaining skilled employees. “The challenge that faces Unit is the same challenge that faces most of the industry,” Cromling states. “The challenge is people: hiring good people, training them and retaining them. Those are the three areas we focus a lot of our efforts on.”

Unit Drilling has made several changes in its approach to hiring to attract skilled, high-level applicants. For example, previously, the rig managers were responsible for hiring the crewmen at a local level, Cromling explains.

However, a couple years ago, Unit Drilling decided to hire for all its divisions and sites through a central location. “We recognized that our applicants needed to be carefully screened from the start of the hiring process,” Cromling explains. “We still wanted our rig managers and tool pushers to have input on the hiring process, as well as make recommendations, but the interview and orientation process needed to be more formal and stringent.”

Since Unit Drilling implemented its new approach to hiring, Cromling says the applicants have been stronger and turnover has been reduced by 50 percent. Unit Drilling has been thinking out-of-the-box – or out-of-the-industry, as it were – to recruit new employees. The company hired a recruiter to identify people who may be skilled in other trades or industries whose experience could transfer into drilling work. The approach has been successful.

“Companies that rely on their staffing by attracting someone from another company have a short-lived approach,” Cromling says. “If we do attract someone from another contractor, for example, we have to offer them more money and better benefits. But, there’s nothing stopping another contractor from attracting them away from us. It’s a vicious circle.

“So, we hired a recruiter who is familiar with what a roughneck does,” he continues, “to travel across the country to identify workers in industries that fit the profile of the type of worker we wanted. These could be people who are used to machinery or working outdoors, but not necessarily familiar with drilling rigs.”

Unit Drilling has targeted people who have recently completed military service or automotive workers who have been laid off due to plant closings. Cromling says the company holds job fairs and gives presentations on rig work to inform potential candidates about the industry and answer their questions.

“We present our case about what working on a drilling rig is all about,” Cromling says. “We’re still stringent in our screening, though. We’re not looking at hundreds of people to work for us; it’s more like we want 100 really good people.”

Providing employees with a good work schedule, thorough training and top benefits helps keep retention numbers high. Cromling says rig workers typically work 12-hour shifts for seven days, and then are off for seven days to be home with their families. Living accommodations are provided when workers are on site.

“The seven days on, seven days off schedule has opened us up to a whole world of people who would be interested in rig work, but don’t necessarily want to move,” Cromling explains. “Some people struggle to adjust to being away from home at first, but we help prepare them for the transition in the recruiting process. And, we provide a good work opportunity for them, so it is an attractive offer.”

Cromling states that if other drilling companies begin to approach the labor issue in similar ways, the whole industry will benefit.

High Retention
In addition to benefits – such as a good insurance policy and 401(k) plan – Unit Drilling provides other incentives to employees. “Beyond the financial incentives, we offer a safe work place for our people,” Cromling stresses. “Working people are very aware of the importance of safety, which is why safety is a top priority for us and them. The importance of safety goes without saying.”

Training is a priority, especially because many workers may not have previous rig experience. As a result,  Unit Drilling works with several vocational schools in Oklahoma and a school in Wyoming to help prepare new workers.

Cromling says the company also has an in-house mentoring program for additional on-the-job training. “Simulation training is important, but it can only go so far,” he notes. “There are very different dynamics on a real rig, and we prepare our workers for that.”

Cromling adds that Unit Drilling’s training program is very structured. In the first three months, new employees review about 200 different topics. “We document everything and it’s very formalized,” he says.

Key Investments
One key project for Unit Drilling is the Pinedale, Wyo., drilling site. Cromling says the site is unique because there are 10 rigs concentrated in a relatively small area. “The land we are on is federal land, and there are many wildlife and pollution concerns,” he explains. “We need to be very environmentally sensitive about the work we do there, and all our operators are very aware - aware isn’t even a strong enough word for it.”

Operators signed several federal agreements with various agencies in order to have permission to drill. The agencies have placed demanding guidelines on the types of equipment and rigs that are allowed in the area, and Unit Drilling must comply.

Additionally, Pinedale is one of the coldest regions in the Rocky Mountains, so the equipment and rigs need to be designed to withstand the elements. “It’s a fairly isolated spot, so we’ve had to be creative in attracting workers to go there,” Cromling says. “It’s a very beautiful area, though, and we have enough drill sites to stay busy there for another 10 years. There’s not really any other place that we can see 10 years of reserves in, so it has been a great opportunity to make an investment there. We know there is a long life in Pinedale, and the activity continues to grow.”

Unit Drilling has invested about $500 million in new equipment, and nearly all the rigs it has built in the last five years are electric. The company has also upgraded its rigs with new engines and purchased larger mud pumps, top drives, skidding systems, mud systems and safety devices.“We have new machines that take out some of the physical labor that roughnecks do,” Cromling says. “With that equipment, the workers do more with the machine than the strength of their backs.

 “In a general sense, we invest everything we make back into the company, but that’s the nature of a drilling company,” he continues. “In particular, in the last few years, we’ve invested on a grander scale in several areas: equipment, software – everything.”

With equipment being an essential component to Unit Drilling’s work, the company maintains an in-house maintenance support group of about 100 mechanics, electricians, welders and machinists. Cromling says this allows the company to make any repairs in a timelier manner. “We can take care of the maintenance issues ourselves without having to rely on an outside party,” he notes.

Small-Company Personality
Although it offers financial incentives to employees, Cromling says the culture is the No. 1 reason employees remain loyal to the company. “We have tried to maintain a small-company personality as we have grown,” he explains. “We have separated our operations into various divisions, which operate like small companies. In total, we have nine operating divisions, and we give our managers a lot of independence and authority. They operate their division like it’s a small company of 15 or 20 rigs.”

Managers are expected to know their employees and help them feel like they are an important part of the organization. Most managers at Unit Drilling not only know their employees, but also their families, Cromling adds.

“When workers complain about their job, the No. 1 complaint is that they feel like a number,” he continues. “Employees want management to know them, which is why we’ve made that close-knit culture a priority. We’ve taken this approach all along. We didn’t just wake up with 128 rigs and say, ‘Let’s try it this way.’”

Unit Drilling also expects managers to react to problems or issues within 30 minutes. Cromling says at other large companies, layers of bureaucracy make it difficult for fast remedies. “It can take a day or two to make a decision in other organizations,” he explains. “Whether it be a maintenance or personnel issue, we want it addressed in 30 minutes. On occasion, it may take longer, but by and large, we get it done. That’s one of the keys to our success.”

Compelled to Grow
As a publicly traded company, growth is a priority for Unit Drilling. “We’re compelled to grow,” Cromling says. “If you’re not growing, you’re dying.” He says the company is looking at growth in many areas of the country, including Texas, New Mexico, Appalachia and the West Coast. “We’re always looking for opportunities and companies in new regions that are strong,” he says.

When considering an acquisition, Unit Drilling looks for independent companies with strong people already in place and a good reputation. “With our financial abilities, we can help good companies grow,” Cromling states.

Strong management has also been a core foundation for Unit Drilling. Cromling says a conservative approach and acting with integrity and honesty have been the company’s strategies.“We have always been conservative in our outlook,” he states.

“We are willing to reinvest our money on training, development and equipment, but being conservative in our growth, maintaining a community presence and acting with integrity have helped us be successful,” he adds. “We have the financial strength in place to make deals that other companies can’t do – and that’s been a huge benefit to us.” n