NEW YORK (Reuters) - Fast-talking auctioneer Greg Highsmith sung out dozens of prices - "seventy-five-hundred now, $10,000 now, be able to get 15,000?" - before a North Dakotan buyer paid $27,500 for a used Caterpillar oil swabbing rig on Friday.
Total time taken to auction that rig, which when new could cost more than $500,000? Just 51 seconds.
The rig was on of more than 2,000 lots offered in an online auction of oil, gas and industrial equipment out of North Dakota's Bakken shale region on Friday.
The auction market is more active than at any point since the downturn of the 1980s, said Dan Kruse, a San Antonio-based auctioneer and founder of Superior Energy Auctions, which specializes in energy equipment.
Oil prices crashed this year, dropping at one point to negative-$37 a barrel. While the U.S. crude benchmark CLc1 has recovered to nearly $40 a barrel, U.S. and Canadian oil companies have slashed production by over 3 million barrels per day (bpd) and cut working rigs by nearly 800 from a year ago to just 305 in June, leaving a lot of idled equipment.
Spending is down about 35% from the first quarter to the second. The cutbacks have prompted auctions from Odessa, Texas to Alberta, Canada, where auctioneers like Highsmith are banging gavels to close deals on equipment. Even if oil prices remain in the high-$30s, that will not be enough to spur much in the way of additional drilling.
"We'll need fewer coal tubing units, fewer well service rigs, fewer trucks, sandmines, everything," said James West, analyst and senior managing director at Evencore ISI.
Ritchie Brothers, the biggest industrial auctioneer, conducted its largest-ever Texas auction in Fort Worth earlier this month, selling nearly 5,300 equipment items and trucks for over $81 million. Due to the coronavirus pandemic, the auction was held online, drawing 11,600 prospective buyers from 68 countries.
Rigs that are just three- to four-years old that would have sold for $8 million to $12 million a few months ago are likely to fetch much less.
"Top of the line - it could bring $5 million, but maybe not," said Kruse, of Superior Auctions. He will know in coming days when he steps up to the podium in Odessa, Texas, for his first auction since the downturn.