Oil patch pain drives bargain-hunters to equipment auctions
By Nia Williams
EDMONTON, Alberta (Reuters) - In an auction room a few dozen potential bidders scan a picture of a used oil drilling rig projected on the wall while an auctioneer raises his voice to drum up enthusiasm.
"If you came to this sale not looking for a rig you should be looking at it now," the auctioneer bellows into his microphone. Initial asking price on the rig - complete with water, mud and shale tanks - was C$150,000 ($107,650) and it eventually sold for C$52,500, a fraction of a cost of a new rig that can fetch between $7 million and $15 million.
Business is brisk at this 180-acre (0.73 square km) Edmonton site and other North American locations of Ritchie Bros. Auctioneers (RBA.TO: Quote) - a clear sign that the oil industry has little hope that crude prices will recover any time soon.
The world's largest industrial auctioneer stresses it sells more than oilfield equipment, but it is no secret that many sellers are oil companies reeling from the 18-month rout that has driven crude prices near 11-year lows this week Clc1.
"All the oil companies are pulling their horns in so there's none of that work. If the price stays low, it's going to get a lot worse," says Frank Richardson, a general contractor from central Alberta.
Richardson uses the auctions to sell equipment when warranties expire and replace it with newer machinery.
This year was one to forget for the oil industry, but a bumper one for the Vancouver-based Ritchie Bros., with record third quarter gross auction proceeds of $894.5 million from 54 auctions worldwide. U.S. revenue was up 25 percent in the first three quarters.
"There's been a slowdown in capital investment, which means people are working less and there's excess assets available," Randy Wall, Ritchie Bros. Canada president, told Reuters. Continued...