Shale Jobs Drying Up in Permian Basin

Shale Jobs Drying Up in Permian Basin
Signs of a slowdown permeate the Permian Basin, Bloomberg reports.

(Bloomberg) -- Barry Marks can hear the Permian Basin slowing down.

It’s right there on country-music station 96.1 FM in Odessa, Texas, where commercials for shale-patch jobs used to fill the airways. Those kinds of radio ads have fallen by two-thirds, said Marks, the general manager for ICA Broadcasting LLC, which runs five stations in the area.

“A lot of those people working in the Permian Basin do not reside here,” Marks said. “So they’re heading home every two weeks. And they may just be staying home.”

Signs of a slowdown permeate the Permian Basin, the 55 million acres (22.3 million hectares) in West Texas and New Mexico whose abundant oil and widespread fracking fueled America’s quest for energy independence. Dragged into the downdraft of this year’s 19% drop in drilling are orders for everything from giant earth movers that build well-site roads to chemicals used to kill bacteria during hydraulic fracturing. Rig counts are down, hotel proceeds are declining, home sales are slowing and fewer jobs are available than just last year.

Less Stuff

“If you can’t wring out any costs savings then you’ve got to buy less stuff if you want to get your costs down, and that’s the phase we’re entering into,” said Jesse Thompson, senior business economist at the Houston branch of the Federal Reserve Bank of Dallas. “You’ve seen this work its way through on the manufacturing side as quickly if not more quickly than we saw in the rig count on the oilfield services side.”

Through August, Permian employment has grown at an annualized rate of 0.7%, far less than the 11.4% growth of the same period last year, the Dallas Fed said Wednesday in its latest monthly report. Unemployment in August, the latest period available, is at 2.3%, inching up from the region’s low of 2% in May.

Caterpillar Inc., which makes a wide range of equipment for the industry, such as generators and pumps used by drillers in the field, blamed the Permian for its lower second-quarter sales in oil and gas equipment. The company warned investors in July that annual profit will probably come in at the lower end of its forecasted range, in part because it has cut expectations for West Texas revenue.

Cyclical Market

Balchem Corp., which sells chemicals used in hydraulic fracturing, has been counting on a return to pressure-pumping in the Permian during the second half of this year.

“But we’ve not seen any indication of that yet,” Martin Bengtsson, chief financial officer for the New Hampton, New York-based company, said on an August conference call with analysts and investors. “We remain cautious about this historically cyclical market and it’s hard to accurately forecast the ups and downs.”

Lights warning of reduced oil production have been flashing.

Last month, oil explorers slashed drilling work by the most in a single week since January 2016, when crude prices were headed to their lowest in 12 years. The number of Permian crews, who come in after the drilling teams to get wells ready for production, has tumbled every week since the end of July and now sits at a 30-month low.

With fewer workers drilling and fracking, hotels are taking a hit. Revenue per available room declined 32%, year over year, in August, and year to date is down 21%, according to STR Inc., a research and consultant firm that tracks tourism data. By comparison, the figure for the U.S. as a whole, year to date, is a rise of 1.1%.

‘Very Rare’

Double-digit changes in either direction are “very, very rare,” said Jan Freitag, an STR senior vice president. Talking about the big moves in Odessa and Midland, the Permian’s biggest cities, he added: “Normally, you get that when something like a hurricane hits.”

Sales of existing homes in the Permian climbed 5.7% in August compared with the same period last year, according to the Dallas Fed’s Permian Basin Economic Indicators report. But even that gain was below the increases in 2017 and 2018, the bank said.


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Alex Turner  |  October 05, 2019
If this is the case then why have all the west Texas oil companies been placing orders to drill quip and why have the same companies been short staffed
Rick Cisneros  |  October 04, 2019
Oil price manipulation? Throw out false info? Same is said about highway work in California. Calif ups the gas tax to promise more highway road repairs. Billions are generated. But "experts" say where did the money go? Its not working. While the daily radio reports freeway closures every Night every where due to Night Paving. LoL. Lots pf work. Need new men and women in the trades. Major shortage in SF Bay Area. Unions hiring!!
Robert J. Monju  |  October 04, 2019
If this is accurate, then, why are there hundreds of unfilled job positions for W. Texas companies? Somebody got their wires crossed.


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