Low oil and gas prices mean a daily struggle
FARMINGTON — This year has not been an easy one for local oil and gas companies and those providing support services.
It's been a year of layoffs and cutbacks without any change predicted for the immediate future.
In April, ConocoPhillips announced local layoffs, followed by similar announcements from local yards like Halliburton on Main Street, and, most recently, Baker Hughes Pressure Pumping laid off its entire hydraulic fracturing, or stimulation, department. A total of sixty-seven Baker Hughes employees' jobs were cut, just weeks before Thanksgiving.
San Juan County CEO Kim Carpenter estimates that more than 400 people in the county lost oil and gas industry jobs in only the last six months.
On Nov. 18, only four of 19 drilling rigs were in operation in the San Juan Basin. Work-over, or service, rigs were holding in the upper 30s, with about 45 sitting idle in yards throughout San Juan County.
Since the collapse of oil prices on the commodities market last fall — which saw a barrel fall from a high of more than $140 to a current low of about $40 — companies, from giants WPX Energy and ConocoPhillips, to smaller independents, have had to find a way to keep working.
Allen Palic, managing member of L and R Swabbing in Farmington said that the downturn has made his oil and gas service business a day-to-day struggle.
"It's up to us to be as creative as we can and (using) as much ingenuity to find those cuts and stay competitive," he said. "One of the things that's disappeared is the ability to be able to plan for next year. It's almost a one-day-at-a-time battle. There's not a lot of information that gives anybody the chance to plan forward. It's trench warfare."
L and R Swabbing has been in operation since 1990. Originally, Palic said the company began as a construction company called L and R Oilfield, adding the swabbing company in 2000. The two businesses ran side-by-side until December 2014 when the construction business was shuttered.
Swabbing is a process by which liquids are brought up from a well bore — after hydraulic fracturing or after completion — if the well's pressure has fallen and fluids in the formation are unable to travel upwards to the surface.
Palic said the decision to close one of his two businesses was one of necessity.
"When we were running both portions of our business, we had around 110 employees. Now we're at about 50," he said. "We've done some small cutbacks this year. It all ties into changing how our work is approached and not being top heavy on labor."
After years of working in the oil field doing flow-back work, Andrew Riddell decided to start his own oil and gas service company with his childhood friend, TJ Spitzer.
The result was True North Energy Services, launched two years ago.
Running the Bloomfield oil and gas service company, which offers well testing and facility monitoring services day or night, has been anything but routine, he said.
Earlier this year, he decided to share a yard on South Church Street with Backroads Energy, owned and operated by his brother, Kyle Riddell.
"We took a big risk, but we really wanted to do something on our own, so we dove in head-first," Andrew Riddell said. "For the most part, it's worked out really well. Heck of a time to start a business, but we're making it."
True North has about 15 employees, mostly doing service work for their main client, WPX Energy, he said.
"At one point we had about 25 employees in July and August," he said. "It was really busy then, but come September, things really slowed down. You just have to adjust to what is going on. It's all pushed by the price of oil."
Andrew Riddell said that despite laying off about 10 employees, he's been able to hire some back.
"We didn't want to get rid of anybody," he said. "You don't enjoy it. The work fluctuates. That's just the nature of the business."
As a new service company, True North is counting on providing quality service and a word-of-mouth reputation to land more work.
"We're still kicking around. We take a lot of pride in our work," he said. "We are still around because of the quality of our work. We are small. We have a tight-knit thing going."
Wally Drangmeister of the New Mexico Oil and Gas Association said that while the oil and gas industry is under pressure because of low oil and gas prices, companies like Riddell's and Palic's are doing what it takes to keep working.
"The industry as a whole has been very resourceful," Drangmeister said. "The independents, they're more at the mercy of being behind the curve. But some of them are proving to find a way at the end of the day to continue operations as best they can."
Drangmeister's association has been busy promoting the benefits of the industry statewide to schools, business and community groups. Along with efforts to get the message out that the state energy industry's taxes and fees account for roughly a third of New Mexico's general fund each year, Drangmeister said his group is also trying to showcase the industry's ability to innovate with technology amid a number of newly proposed rules from the federal government that seek to update regulations that don't account for technological advances like horizontal drilling.
Those proposed rule updates, including three proposed by the Bureau of Land Management, have the industry on edge, he said.
"It's the onslaught of regulatory initiatives combined with low prices that causes heartburn, for sure," he said.
Like WPX Energy, which in February asked all of its vendors to take a 20 percent cut, Palic said L and R Swabbing has also resorted to asking its vendors for price reductions.
"We understand both sides of the equation — it's a tough part of the job, but you have to do it to stay in business. It's not a pleasant experience," he said.
Palic said that his business no longer has a backlog of jobs to count on.
"People underestimate what companies mean when we say 'survive.' We're not making those cuts to thrive. You're making those cuts to remain on life support," he said. "There is no backlog of work. It does not take much of a glitch to upset the continuous balancing act that we have right now. It's like that saying (by President Harry S. Truman) — 'When your neighbor loses his job it's a recession. It's a depression when you lose yours.'"
James Fenton is the business editor of The Daily Times. He can be reached at 505-564-4621.