Steady oil prices and improved drilling technology have led to another banner year for the state’s energy industry.
The success came even as plunging natural gas prices all but wiped out the effort to drill for dry natural gas.
Fueled by the strong oil drilling activity, Oklahoma’s energy industry again topped this year’s Oklahoma Inc. list, claiming nine of the top 10 places.
“Oklahoma has led the nation in job growth through the recession. We have gained back all the jobs that were lost and more,” said Mike Terry, president of the Oklahoma Independent Petroleum Association. “From a tax perspective, the oil and gas industry continues to pay almost one-third of the taxes in the state.”
The Oklahoma Inc. rankings are produced annually by Standard & Poors, Capital IQ for The Oklahoman.
Improved drilling technology combined with strong oil prices have led to a new wave of oil drilling throughout Oklahoma and the country.
Much of the new drilling in the state is in northern, western and southern Oklahoma where companies have been producing oil for about a century.
“The exciting part is that there were old plays that were drilled a long time ago, but they are being rejuvenated,” Terry said. “It’s like hitting the reset button and starting again. Recoverable reserves, before it’s all said and done, will be much higher than they were years ago when the fields were first developed.”
While the industry growth has led to increased profits for energy companies and shareholders, it also has benefited royalty owners throughout the state. Much of the renewed drilling is in parts of the state where oil production previously peaked decades ago.
“A lot of that production had dwindled to the point that it was barely marginal and was at risk of being plugged and abandoned where the royalty owners would get no more money at all,” said Jerry Simmons, executive director of the National Association of Royalty Owners.
“Horizontal drilling coupled with hydraulic fracturing has allowed them to go back into these old fields and produce so much more oil and gas than they could have gotten before. It’s a boom to landowners.”
The royalty owners association estimates that oil and natural gas producers in Oklahoma paid royalty owners more than $1 billion in 2011.
Nationwide, about 8.5 million royalty owners receive regular checks from oil and natural gas production, Simmons said.
“That’s a lot of folks who aren’t company executives, but are just regular people who rely on that income,” he said.
While many aspects of the oil and gas industry are growing, the state’s pub-licly traded pipeline and storage companies may have benefitted most over the past year. Five of the top 10 Oklahoma Inc. companies are focused on oil and refined product storage and transportation, which are known as midstream assets.
Increased domestic drilling has changed where pipelines are needed.
Oil production has led companies into new production areas such as the Bakken Shale in North Dakota and the Eagle Ford formation of south Texas.
It also has led companies to return to areas that produced decades ago, but where the existing infrastructure cannot support current and projected activity.
“You can produce all you want to, but if you can’t get it to market, it doesn’t do you much good,” Terry said. “You can put all those reserves on the books, but you can’t sell it if you don’t have that infrastructure. You have to have both. That’s why the services sector is so critically important to the production sector. We have to work together.”
Contributing: Jay F. Marks, Business Writer