When the New Year arrived, it was clear Odessa would not see another year of an oilfield boom. Instead, locals in the industry wondered just how bad it would get and for how long?
As the year ends, those same questions remain.
The Organization of Petroleum Exporting Countries agreed on Thanksgiving Day 2014 not to cut production in the face of weaker-than-expected global demand and a supply glut.
Oil prices had already been falling for months on concern about weakening demand for crude. But a day after the OPEC decision, the price of U.S. benchmark West Texas Intermediate crude fell 10 percent to more to about $65 per barrel, a crash not seen since the Great Recession.
Now, of course, oil prices are only about half that level, ending Friday at $34.73. (The regional benchmark Plains-West Texas Intermediate Posting ended at $31.25 per barrel).
Still, in January, the effects of the price rout on local industry were merely anticipated. Drilling remained robust as oil companies’ budgets played out. By Jan. 9, the rig count was dropping — falling by 28 in the previous week — but there remained 502 rigs actively drilling in the region, according to Baker Hughes’ rig count.
Steve Pruett, the CEO of Midland-based Elevation Resources, described the resulting anxiety to the Odessa American this way in a Jan. 10 article:
“There is a shadow over Midland-Odessa and the Permian,” Pruett said. “The frenzy of activity is slowing down — the traffic and frenzy and pace. Obviously the enthusiasm is gone. It’s like a balloon that got popped.”
The rig count would plummet, most recently falling to 206 active in the Permian Basin. Dozens of those rigs belonging to driller Helmerich and Payne, remain idle along Business 20, a scene that news organizations around the world published as an illustration of devastation of the oil drop on oil provinces like the Permian Basin.
The mass layoffs would follow in the weeks and months to come, while oilfield workers who survived the reductions saw hours cut as jobs became scarcer.
Some of the layoffs were publicly announced.
In late January, driller Lariat Services laid off 265 people in the Permian Basin as its parent company SandRidge Energy closed the divisional office. In March, Trican Well Service, a later entry into the booming Permian Basin, laid off 137 workers, leaving 128 in hopes of continuing to seek work in the region.
A few months of relative stability, some bold oil company pronouncements and a slight uptick suggested at times a bottom to the oil rout that proved false.
By August, Dale Redman, the CEO of the private oilfield services company ProPetro, predicted no significant return to activity until “oil prices get back into the 50s and the 60s and look like they are going to sustain that.”
Budget cuts and layoffs continued, as they still do.
Many companies, in announcing mass layoffs, did not offer a breakdown by region, making the true losses in the region difficult to quantify.
The impact on the local economy was inescapable. Sales tax revenue to the City of Odessa is falling. Earlier this month, the U.S. Bureau of Labor Statistics reported Odessa had the biggest one-year increase in unemployment out of any metropolitan area in the country, climbing 1.7 percentage points to a total 4.7 percent. The BLS report used data through October.
The Amarillo economist Karr Ingham, who studies the local economy, estimated that some 8,000 jobs, if not more, were lost since the end of 2014, with further losses likely ahead.
The Permian showed some resiliency, with a handful of oil companies that focused on the region outperforming peers.
Those included Concho Resources, Diamondback Energy, Parsley Energy and RSP Permian — all of whom focus purely on the Permian Basin, where they claim prized sweet spots, and all issued equity in 2015.
But what Ingham described as “the broader market problem” still exists. And that is the supply glut that the boom of the Permian Basin helped create.
The Permian Basin was the only shale oil producing region in the country expected to keep growing production this month, according to the Energy Information Administration, which predicted the region will pump more than two million barrels a day as overall production from shale in the United States starts to decline.
On Dec. 4, OPEC signaled it would stay the course and not cut production. And oil prices kept falling — even on news that would typically boost prices, like the terror attack in Paris.
On Dec. 18, President Barack Obama signed a bill lifting the country’s four-decade-old ban on exporting crude out of the United States — a move long sought after by local oilmen and elected officials that will open Permian Basin crude to international markets. But the short-term effects were widely anticipated as minimal.
Local religious organizations are praying for a recovery, like First Baptist Church of Odessa’s oilfield ministry and the local chapter of the Oilfield Christian Fellowship, who saw more than 500 jobs seekers attend the Rock the Oilfield Job and Resource Event they organized on Nov. 20 to help displaced workers.
“I didn’t expect to see a bust this quick or this severe,” Jesse Gore, the self-identified “boom pastor” with First Baptist, said at the time. “I think for the most part, it catches people off guard when it drops, the price of oil.”
This article was written by Corey Paul from Odessa American, Texas and was legally licensed through the NewsCred publisher network.