San Juan Basin drilling activity hits zero

James Fenton

FARMINGTON — As the latest sign of the severe and lingering effects of the downturn in the local energy sector, oil and gas company yards throughout San Juan County are all full.

Workers service workover rigs on Thursday at Aztec Drilling in Aztec.

For the first time this year, every drilling rig that could be drilling for oil and gas in the San Juan Basin is sitting idle.

Since the price of crude oil began its precipitous fall almost 20 months ago, oil and gas companies in the county have been struggling to stay afloat — selling assets and equipment, slashing prices, stopping productionlaying off workers or filing for bankruptcy.

Local company officials say the prolonged "bust" period that was ushered in by record low commodity prices for natural gas and crude oil makes this the worst downturn the San Juan Basin has experienced in more than a generation.

Jason Sandel, Aztec Well's executive vice president, said the entire community — from people struggling to find work to elected officials faced with severe budget woes — is just beginning to feel the acute pain from the downturn.

The company's yard is "plumb full" of drilling rigs, he said.

"Times are very difficult, but I continue to focus on what this means to the community at large," Sandel said today. "I know what this means for our company. We're fighting and kicking and screaming every day to make sure we keep our heads above water. We're very focused on keeping morale as high as possible."

Sandel said that while previous "bust" cycles in the volatile fossil fuels industry have been sharp, the current downturn stands out as the most prolonged.

Worse, there is little hope it will improve any time soon, he said.

"Even if oil climbs back above $50 (a barrel) and stays there for any sustainable time period, there's months and months and months of planning, permitting and budgets that have to be worked on before you are going to see any sustainable uptick of activity," Sandel said. "We remain very focused on the current situation remaining the way that it is throughout 2017. We're working as an organization to continue to weather that storm."

Aztec Drilling workers keep busy by servicing equipment in the rig yard on Thursday in Aztec.

Keith Rhodes, drilling superintendent at D&J Drilling LLC in Farmington, said the independent drilling company just returned its only active rig to the company yard this week.

"We just finished a well in Archuleta County, in Colorado, that was working there for three weeks and moved it back to the yard on Monday," Rhodes said. "It's tough. Really, it's tough. That was the first job we've had since last October."

Rhodes, who started working in the oil field in the early 1970s, said he agrees with Sandel in that this is the worst downturn he can remember.

"We've taken pay cuts and laid just about everybody off," Rhodes said.

D&J is down to six employees from a staffing high of about 45, he said.

"When we came into the yard last October, we laid off the hands — derrick hands, motormen, floor hands — and we kept the drillers and pushers 'til Christmas. Right after Christmas, we laid off the drillers, and from there, we went to wage cutting just to survive. I've never seen it this bad in the basin where we've always had a few rigs running most the time. The length of time on this one, I've never seen it this bad. We've always had a little downturn, but it never lasted this long."

Even in the volatile boom-and-bust nature of the oil and gas industry, bust periods usually last only about six months, he said.

Though he also doesn't believe the basin will improve until "sometime next year at the earliest," Rhodes said new federal rules that are being revised for the first time in more than 30 years by agencies such as the U.S. Bureau of Land Management and the U.S. Environmental Protection Agency only make the belt tightening more difficult.

A idle workover rig sits in the rig yard of Aztec Drilling on Thursday in Aztec.

"I wish something would break — oil prices, anything — that would boost the drilling in the basin," Rhodes said.

Sandel said he and his father, Aztec Well President Jerry Sandel — who founded the independent oil and gas service company more than 50 years ago with his parents, Sally and Wayne Sandel — agree the current downturn is one of the greatest challenges the company has ever faced.

"Where we use to keep salaried professional men and women on as long as we could, we're now having to bump salaried (workers) down to hourly jobs," he said. "I have salaried tool pushers who are literally out digging ditches to just stay employed. I continue to come back to the community and the people. Their dedication and the commitment I see from our employees and their willingness to survive in these really difficult times and bring energy for our country's future is humbling."

James Fenton is the business editor of The Daily Times. He can be reached at 505-564-4621.