Exxon’s Shale Driller Tightens Drug Testing for Rig Workers

By Joe Carroll and David Wethe

(Updates with closing share price in last paragraph.)

Jan. 5 (Bloomberg) -- Union Drilling Inc., the rig owner hired by Exxon Mobil Corp. to explore U.S. shale rock formations for natural gas, toughened drug testing of rig workers in an attempt to cut down on accidents.

Union is switching to hair-follicle tests from urinalysis to detect drug use, Chief Executive Officer Christopher Strong said at the Pritchard Capital energy conference in San Francisco yesterday. The new protocol already has reduced emergency calls from its drilling sites, he said, according to a transcript of his presentation.

Energy producers exploring shale rock are facing increased scrutiny from environmental regulators, landowners, lawmakers and investors after intensive drilling techniques were linked to water contamination and earthquakes. Drug abuse tends to be more frequent among drilling crews than other oilfield workers, Roger New, vice chairman of the Energy Training Council in Yukon, Oklahoma, said in an interview today.

"The screening process on new hires has really been ramped up a lot," Strong said. "We're just not seeing nearly as much hotline traffic about problems on the rigs." He didn't return a call to his office in Fort Worth, Texas, today.

The Macondo Effect

The industry is "more worried" about safety and liability since BP Plc's 2010 rig disaster at the Macondo well in the Gulf of Mexico killed 11 workers and provoked a safety crackdown, John Keller, an analyst at Stephens Inc. in Houston, said today in a telephone interview.

"There's a PR liability, if not a real liability, if some guy's stoned and messes up on a rig," he said.

Drug use historically has been a problem among rig workers, perhaps because of the lack of outside licensing requirements that govern other jobs, such as truck driving, New said, whose full-time job is safety manager with Oklahoma City-based Great White Pressure Control.

"It's hard work," said David Pursell, a former petroleum engineer who's now a managing director at Tudor Pickering Holt & Co. in Houston. "The pool of folks who want to work in the oilfield is narrower than a traditional manufacturing operation."

Fracking Shale

Union's fleet of 51 land-based rigs focuses mostly on horizontal drilling, the practice of cutting sideways through a geologic formation to reach more gas or crude. Extracting fuel from shale requires the use of horizontal wells and blasting millions of gallons of high-pressure water, chemicals and sand to break rock thousands of feet underground, a technique known as hydraulic fracturing.

The number of rigs drilling horizontal wells in the U.S. surged 23 percent in 2011, reaching 1,184 on Dec. 16, the highest since at least January 1991, according to Baker Hughes Inc., an oilfield-services provider that tracks rig activity.

Union drills wells in several of the major U.S. shale formations, including the Fayetteville region of Arkansas and Oklahoma, and the Marcellus and Utica shales in Appalachia.

William Holbrook, a spokesman for Irving, Texas-based Exxon, referred Bloomberg News to the company's employee handbook.

Drug abuse is grounds for termination and outside contractors are required to follow the same zero-tolerance policy, according to the handbook.

Union shares fell 2 percent to close at $6.43 in New York. The stock declined 14 percent in 2011 for its largest annual drop since 2008. The company is 23 percent-owned by Metalmark Capital LLC, a private-equity firm owned by Citigroup Inc.

--Editors: Jasmina Kelemen, Charles Siler

To contact the reporters on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net; David Wethe in Houston at dwethe@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net