Water-well drilling: profit per well, not per metre

«We drilled a hundred and ninety wells this season. Two rigs, six people, the phone does not stop ringing from April. And in November I sit down to count and cannot work out where the money went» — that is how Ihor, who owns a water-well drilling company, opened the conversation.

Sound familiar? The jobs are booked three weeks ahead, the rigs are in the field every day, clients ring and ask for «even Saturday would do». And at the end of the season it turns out that two hundred wells brought in less than you had expected from a hundred and fifty.

The reason is almost always the same. Drillers measure themselves in metres drilled: price per metre, cost per metre, the season plan in metres. The metre is a convenient unit for a price list, but the money in this business is not decided there. It is decided at the level of an individual well — and at the level of a day when your rig stood in a field.

In this article we break a drilling company down into two units: the well and the rig-day. Because in drilling you do not earn on metres, but on jobs deeper than the point at which your fixed costs have finally paid for themselves.

The founder's path: from one rig to two

Ihor bought his first trailer-mounted rig twelve years ago. The logic was simple: everyone needs water, there are two competitors in the district, there will be enough work.

For the first few years he counted simply: sixteen hundred hryvnia a metre, forty metres, sixty-four thousand, minus the casing and the pump. The rest is yours. He earned the second rig in three seasons.

And then the strange things started. The second rig doubled the number of wells but did not double the money. More than that: in the seasons when they drilled especially hard, there was less left in the account at the end of the year. There was no explanation, because the spreadsheet held one figure for all of it — metres drilled.

Why «metres drilled» is a misleading unit

The metre is convenient for a conversation with a client. Quote a price, multiply by depth, give them the total — all fair and clear.

The problem is that your costs do not behave that way. The casing and the pump genuinely scale with depth. Moving the rig, getting the crew out, rigging up and rigging down on site, and the drive back do not. They are the same for a well at twenty-five metres and for one at eighty.

As long as you measure yourself in metres, those costs are smeared across the whole season and it stays invisible that part of your jobs do not even cover them.

What a well actually costs

Take a typical job: forty-five metres turnkey, with casing, screen, pump and wellhead. The price is ₴1,600 a metre, a contract of ₴72,000.

Thirty thousand of difference on one well is neither an error nor theft. These are ordinary operating costs that simply nobody attached to a specific site. Multiply by a hundred and ninety wells and you get exactly the sum that is missing every November when you need to get calmly through to April.

Why a shallow well runs at a loss

Here is the most unpleasant discovery Ihor made. Take the same arithmetic for three different depths.

A well at twenty-five metres: a contract of ₴40,000, ₴17,000 of materials. A day and a half of crew on site, the same rig move, the same drive, the same office time. Total costs: ₴41,800. Result: minus ₴1,800.

Forty-five metres: plus ₴10,500, as we have just counted.

Eighty metres: a contract of ₴128,000, ₴55,000 of materials, three days of crew, heavier wear on the bit. Result: plus ₴31,850.

Same company, same crew, same price per metre. But a shallow well is not «we earned less», it is a loss covered by the deep jobs. And as long as they all sit in one pile you cannot see it: the season as a whole is in the black, after all.

Rig-day: the second unit you have to measure

The first unit is the well. The second is a day of rig work, because that is what limits how many jobs you are physically able to take in a season.

Let us put the same result on a per-day basis. Twenty-five metres takes a day and a half — that is minus ₴1,200 a day. Forty-five metres over two days is ₴5,250 a day. Eighty metres over three days is ₴10,600 a day.

Nearly a tenfold spread. A rig works around a hundred and thirty drilling days a season, and every day spent on a small job is a day that will not exist for a deep one.

That is exactly why «take anything, just so the crew is not idle» is the most expensive decision in this business. A crew that is not idle is not always earning.

The travel radius nobody asks about

The price list states a rate per metre. The distance to the site is usually not mentioned there at all.

A hundred and twenty kilometres is ₴3,100 and half a day on the road there and back. Two hundred and fifty is already ₴6,400 and a whole day gone from the season. If the well is shallow on top of that, you paid for the privilege of working.

When Ihor sorted his jobs by distance, something simple became visible: anything beyond a hundred and fifty kilometres only made sense from sixty metres of depth, or when two sites in the same village could be done on one rig move.

Materials bought before the deposit

To go out on Monday, the casing and the pump have to be on hand by Wednesday. The client pays a deposit — usually half — and the rest after commissioning and flushing.

In season, with six to eight sites running at once, that means several hundred thousand hryvnia permanently sitting in casing, screens and pumps on the shelf and in transit. It is not an expense, so it appears in no profit report. Yet it is precisely what explains why a company with a full schedule looks at the balance every week and decides who gets paid first.

The season: seven months to earn for twelve

Drilling is a sharply seasonal business. From April to October the equipment is in the field; in winter the ground is frozen, the approaches are a swamp, and there are few jobs. But the permanent wages, the rig lease and the yard rent run all twelve months.

That means every drilling day in season has to earn not only for itself but for five winter months. When you count the margin of a well, you are counting half the picture. The other half is how many of those wells it takes to reach next April.

The difference between a company that survives winter and one that takes a loan every February is whether the owner knows his number: how many drilling days at a given average margin close out the whole year.

What changed once the wells were counted separately

Ihor started running every job as its own line: depth, contract, materials, crew days, kilometres, result. Nothing complicated — the well simply stopped being «metres» and became a unit with its own bottom line.

Within a single season three things became visible. First: almost a quarter of the jobs were shallower than thirty metres, and together they ate more than a hundred thousand hryvnia. Second: the two most distant districts gave decent depth but consumed a full day of driving each — the right move was to raise the price for them, not to refuse. Third: if you offer a client with a shallow well a fixed call-out fee instead of a per-metre price, half of them agree, and the job comes out in the black.

None of these decisions required a new rig or more enquiries. They required seeing the well as a unit.

A few closing tips

• Count the result of every well, not the metres per season. The metre is a price-list unit, not a profit unit.
• Find your break-even depth. Below it, jobs have to be repriced or handed to competitors.
• Introduce a fixed call-out fee for shallow wells — it covers the rig move and the rig-up, which do not depend on depth.
• Count the result per rig-day. A season is limited not by enquiries but by days of rig work.
• Book the kilometres against the job you drove to. After a season you will see which districts are worth your time.
• Work out how many drilling days cover the winter. It is the key number of a seasonal business.

Money does not disappear — you simply do not see it

Drilling looks like a business with simple arithmetic: price per metre minus materials. In fact it is a business in which half the costs do not depend on depth at all — and it is precisely those that decide whether a job is profitable.

None of these costs disappears on its own. But the moment every well gets its own bottom line, it becomes visible which jobs feed you, which eat the season — and what to do about it as early as next week.