Oil & Gas News

Oilfield challenges aired

Last Oil Boom, oil
By Bob Campbell -August 8, 2021

By Bob Campbell, Odessa American, Texas – If the energy industry would quit firing all its employees at the first sign of a slump, it wouldn’t be so hard to get going again when oil and gas prices rebound.

That’s the observation of Midland oilman Steve Pruett and Dallas analyst Joseph Triepke, who say the industry’s halting resurgence stems from the refusal of many people to return.

Pruett didn’t run anybody off at Elevation Resources Co. during the pandemic last year, which meant he was able to resume operations without missing a beat.

“We need to stop laying people off when we have downturns and be better about employees’ retention,” he said. “The well service companies don’t have a choice because they have to stay solvent, but the exploration and production companies need to ride out the downturns and hang onto their staffs.

“We should create a more level employment outlook in white-collar and blue-collar jobs so we can attract younger people to replace the generations of workers who are approaching retirement.”

Pruett said the industry’s other big challenge this summer is retaining and recruiting investors to access capital. “We burned a lot of bridges with investors and they may not be coming back to invest in our companies,” he said.

“The best way to recruit investors is to pay a steady and growing dividend so they get good returns.”

With the Texas Workforce Commission reporting modest increases in hiring, Pruett said the industry’s upstream sector is encouraged that the regional and national rig counts are up a little, totaling 233 in the Permian Basin to last summer’s 148 and 457 nationwide to 301 at this time last year.

“We’re scrambling to get qualified people to come back to our rigs and service companies and a lot of them are not willing,” he said. “They come largely from East Texas and Louisiana. Drilling consultants work various shifts, usually 14 hours on and 14 off, and make $1,500 to $2,000 a day.”

With 30,000 to 40,000 area oilfield workers having lost their jobs last year, Pruett said an average of 100 men is required to run a rig and bring a well to completion. “We can drill more wells with fewer rigs now because we’re spending half the number of days drilling that we did five years ago,” he said.

Triepke, a native Odessan who is a partner in Lium Research Co., said it “is getting tougher for sure” to find employees.

“Labor is becoming a source of inflation because companies have to pay workers more, particularly those with special skill sets like the frac crews and wireline crews, which are part of fracking,” he said. “It’s hard to call guys back because they’ve moved on and found other work when they were let go. It is a challenge to reactivate a crew. On the midstream side, they need qualified engineers.”

Triepke said a less specialized but nonetheless vital area is trucking, without which the industry doesn’t go. “Trucking is one of the most labor-intensive things the oilfield does, moving water, sand, equipment, and crude oil,” he said.

“There’s great competition for truck drivers because other industries like Amazon are paying them a lot and in many ways offering a better lifestyle. It’s a tough game, driving down those lease roads, that the drivers face out there.”

Asked his expectations for the industry here, Triepke predicted a small fourth-quarter decline and a bump in 2022. “We forecast increased capital spending and double-digit percentage growth in drilling in the Basin next year,” he said.

Workforce Commission spokeswoman Haley Emerson of Austin said last week that 3,100 exploration and production jobs were filled in June. “Since the low point in September 2020, months with job gains have outnumbered months with declines by seven to two,” she said.

“Upstream jobs are 9,000, or 5 percent, higher than in June 2020, and June’s job count stands at 15,600, or 10.3 percent, higher than last September’s.”

In the Workforce Commission news release, Texas Oil and Gas Association President Todd Staples said job growth “is critical for the economy at large because every direct oil and natural gas job generates an additional three jobs elsewhere in the state’s economy.

“A thriving oil and natural gas sector not only provides the power, products, and fuels we need but also propels the rest of the economy forward,” said Staples, a former Republican agriculture commissioner and former state senator and a representative from Palestine in East Texas.

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