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Texas oil country sees hard times on horizon
Recent boom may not give way to an all-out bust

BY The Associated Press Comments 1
Published: January 23, 2009

MIDLAND, Texas — In the West Texas oil patch, they can see the decline coming from miles away like a pickup kicking up a dust cloud on the highway.

Crews work on a drilling site in the Fort Worth, Texas, city limits in this photo from May 2007. AP archive

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Oil loses energy

Poor prospects

In Texas, independent operators account for 90 percent of oil drilling. In many places, drilling continues because the contracts with the energy companies and landowners have yet to run out. Also, some oil companies hedged against a price drop and are positioned better than others to handle the downturn. But the fear is that once many of these contracts expire, they may not be renewed or renegotiated. Industry experts said that until prices climb back to $70 per barrel or so, drillers may be unable to persuade lenders to give them the financing they need.

The Associated Press

With crude hovering at $40 a barrel from a high of about $150 over the summer, oil and gas companies are cutting back on drilling, layoffs are beginning, and the boom of the past few years is drawing to a close.

The boom may not necessarily give way to a bust. But the days of plentiful jobs, big paychecks and shiny new pickups seem to be numbered.

"It’s been a good ride up, but we’re bracing ourselves for the ride down,” said Midland City Manager Courtney Sharp, who expects a drop in tax revenue next month because of slumping sales in the city of about 98,000.

Kevon Horst, 19, landed his first job over the summer in the booming West Texas oilfields when crude was selling for about $140 a barrel. Horst and about 20 others working a rig near Canadian, about 40 miles from the Oklahoma line, were laid off recently. Gone are his $2,000-a-week job and his new apartment.

He and his girlfriend moved in with her mother, and he is struggling to keep up with the $500-a-month payments on his new pickup.

"I’m in a bind with it,” Horst said. "No one’s hiring now.”

Others in the Texas Panhandle and across the Permian Basin to the south, which produces 20 percent of the nation’s oil, are also concerned.

‘Anxious’ oil towns

Although overall unemployment is still low in Texas oil towns — 3.1 percent in Midland and 3.7 percent in Odessa, or about half the national average — that could change if oil prices don’t bounce back soon.

Recently, two of the nation’s biggest oilfield service providers, Schlumberger Ltd. and Halliburton Co., both of Houston, said they would cut hundreds of jobs because oil and gas companies have scrapped projects.

"Everybody is feeling anxious about the future,” said Ben Shepperd, executive vice president of the Permian Basin Petroleum Association.

Since the end of August, the number of active oil and gas rigs in the U.S. has dropped. No place has been hit harder than Texas, which had 958 active rigs before prices tumbled but only 713 earlier this month, a 25 percent decline.