Citadel Drilling: Time is on Their Side

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For Citadel Drilling, down is up, up is up, and every day brings new opportunities to innovate

In 2013, Citadel Drilling was making fast inroads in Canada’s oil and gas sector. The Calgary-based designer, manufacturer, and operator of the highly advanced TA²CT Series of Alternating Current (AC) triple drilling rigs identified the need to optimize safety, efficiencies and slim down costly downtime and labor. The new venture blended a clear, single focus, visionary technology, and a performance-driven approach to drilling to improve the art, science, and safety of oil production. They were creating a bold presence on the Canadian O&G stage – just in time for the industry to collapse.

That heart-stopping turn of events dared them to embrace the transformative potential of calamity as a driver for excellence. “Our goal in creating Citadel was to insulate ourselves from the industry’s peaks and valleys as much as possible,” Citadel co-founder and CEO Daniel Hoffarth told BOSS. At the ideation stage, the founders filled blank sheets of paper with the changes they felt would move both the company and the sector forward.

“We focused on performance at every level, from high-performing rig technicians, the selection of the best equipment to integrate into the rig, identifying and choosing vendors known for excellence in their fields, and creating a culture of competency and loyalty. From that toolbox we could focus on utilization as our next goal,” he said.

It was imperative that in any given cycle, their rigs and their people would be working. In good times or bad, they wanted to make sure there was always work to be had. “That was a real goal for us,” he stressed. “We believed that utilization had to be the key and that the best fruit at the market gets picked first.” And the keys to achieving the highest rate in the industry were time and safety. “If you can decrease the time something takes and do it without compromising safety, you have a bit of a win there.”

When building the rigs, they examined their operations in 15-minute increments to find time-saving opportunities, such as making a different equipment selection or selecting a different process. Take picking up drill pipe, for example. Over the course of drilling a well, workers may pick up and assemble as many as 600 joints per drill pipe; if the four-minute process can be done safely in three minutes, that’s a 600-minute gain over the course of a single well.

Within the first two years of operations, Citadel achieved well delivery from 60-65 days to 30-35 days. “That’s where you create a lot of value for your client,” Hoffarth said, noting the role operators also play in achieving that success. “They select a lot of other services, and their goal is to have a continuous improvement plan rolling at all times, so they select companies that are complimentary in the way they work together and are able to improve performance.”

The developers and manufacturers of the ultra-efficient, programmable, and safe drilling solutions leveraged a prior successful working relationship with Apache to shift operations from Canada to the U.S., where prospects for success were more readily available.  While this was a completely different division of Apache and new basin to Citadel, past performance earned the company a seat at the table.

In the aftermath of the collapse, Apache was planning to make a disruptive change in the Permian Basin. “They wanted a performance-focused drilling contractor to be a proactive partner, and they’d had a really good experience with us in Canada, so they gave us our first job in Texas.” Within a year, Citadel had six rigs under contract with a variety of operators in the basin. (From that initial moment to today, the downtime rate for those rigs has been and remains under 1%.)  To date, Citadel remains the highest utilized contract driller in North America.

As market conditions continued to evolve, it became increasingly difficult for operators to justify the capital spend to manufacture or purchase additional rigs. “There just wasn't a rate of return for the immense cost of a drilling rig,” Hoffarth recalled. “That left us with a challenge: ‘How do we grow our business and avoid becoming stagnant when buying or building new rigs is impossible?’”

They found part of the answer in the highly competitive managed pressure drilling (MPD) niche. Very simply put, MPD allows for accurate bottom hole pressure control to alleviate typical problems occurring in the course of boring a well, such as over- or under-pressured formations, ultimately making the well easier to control while drilling.

As a performance-focused organization, Citadel had no appetite for simply funding another brick in the MPD wall of challengers and further commoditizing an already saturated business. “There's a lot of MPD companies out there. Some of them are really big players, so the idea of going head-to-head with somebody means that our offering had to be more robust than just MPD.”

Citadel partnered with a team of innovators and founded Opla Energy as a startup, with the concept of developing of a novel technology-based pressure management device to do that. Together, their engineers combined the hardware with innovative operating software and integrated cloud-based machine learning tools, including a remote technical operating centers that provides engineering support 24/7.

Hoffarth calls the advancement a redefining moment in MPD. “We progressed into a performance drilling and optimization business that leverages rather than relies on traditional MPD philosophies. The approach uses automation to control pressure and fluids, enabling wells to be drilled faster without compromising wellbore integrity. In joining forces with Opla Energy, we ended up with a real hit.”

As they were preparing for the R&D phase of prototyping, the pandemic landed its terrible punch. Leadership used the grueling interruption to develop and refine the intricacies of the business. Applying every scrap of time and energy to the pursuit made it possible for them to not only refine their internal processes but to bring some of the best technical thinkers in the world on board and launch a service company that is disrupting the MPD space more than any other player has in a decade.

The software tracks the driller’s movements, digitally monitors the drilling activities, and operates the MPD equipment using real-time data, which dramatically simplifies the drilling process. The technology optimizes the drilling environment for speed while increasing safety and operator confidence. At present, Citadel is aggressively scaling up, building 20 units in 2023 and projecting a total of 44 completed units by the end of 2024.

In any market conditions, Citadel and Opla are primed for tremendous success. As Hoffarth put it, “I think Opla will push some excitement buttons on the tech side of the industry, and probably some panic buttons on behalf of their competitors