Contract drillers aren’t in the business of exploring for or producing oil and natural gas, nor are their earnings and revenues directly dependent on the vagaries of global commodity markets. But since the contract drilling business is sensitive to spending on oil and gas exploration and development, the industry’s up-cycles and down-cycles are driven by the same factors that influence conditions in the market for oil-field services.

Contract drillers own fleets of drilling rigs–equipment used to sink oil and gas wells–and lease those units to exploration and production companies under term contracts that guarantee a daily fee.