The Permian Basin’s oil producers continued to pull back this week, releasing 49 drilling rigs in the region as they seek to wait out oil prices hovering below $50 per barrel.
The drop accounted for half the land drilling rigs shed nationwide. The Permian Basin now has 368 rigs running after several weeks of dramatic cuts.
The regional benchmark Plains-West Texas Intermediate Posting ended at $49.25 on Friday.
Nationally, producers lopped off 98 land rigs this week leaving a total 1,358. The weekly decline was the biggest since January 2009, when a national recession caused oil prices to plummet.
The Permian Basin has shed 197 rigs since the peak of November, when 563 rigs were running.
That is about a 35 percent drop, which began when the Organization of Petroleum Exporting Countries decided on Thanksgiving Day not to cut its production quotas to boost prices amid weaker than expected demand and oversupply due in large part to booming shale regions such as the Permian Basin.
“Those big drops we are seeing, we are going to continue to see those,” said Joseph Triepke, a financial analyst from Odessa and managing director of Oilpro.com, in recently forecasting a national drop of 800 rigs from the peak of November.
If that plays out, producers would release another 238 rigs throughout the country and about 78 more in the Permian Basin. Predictions vary. The firm Genscape forecast the Permian Basin to reach a bottom of 270 rigs before a slow recovery begins.
The slowdown in drilling activity translates into job losses that are mounting, especially among rig workers and oilfield services crews.
Already the slowdown could cost Odessa and Midland 17,000 jobs, according to Karr Ingham, an Amarillo economist who studies the area and the Texas crude industry. His estimation came from applying the 10 percent employment loss during the 2009 downturn to today’s workforce. That could mean less strain on a white-hot economy, eventually lessening housing expenses, for example, that rival major metro areas in Texas.
“There are a lot of good things about this, just because things need to straighten out down there a little bit and the market needs to realign,” Ingham said. “How do you tell that to a guy who is about to lose his job, whose household is in turmoil?”
The major oilfield services companies — Weatherford, Halliburton, Baker Hughes and Schlumberger — announced global workforce cuts in recent weeks that amounted to about 30,000 jobs. None publicly specified how many jobs would be eliminated in the Permian Basin, where many layoffs are expected.
Announcements of plans to cut Permian Basin activity also mount among major oil companies operating in the region.
Pioneer Natural Resources executives this week said the company would release half of its rigs in the Permian Basin, about 16, from what it was running at the end of last year. CEO Scott Sheffield offered a long-term prediction of a “$60 to $80 price world instead of an $80 to $100 price world,” with oil prices starting to rebound in the second half of the year.
Apache Corp. on Thursday became the latest big player in the Permian Basin to announce cuts, slashing the 42 rigs running in the region at the end of last year to 15 by the end of the month. The company also will delay completion on a “couple hundred wells” in hopes of a rebound this year, said CEO John Christmann.
“The point is,” Christmann said, “Why drill them in this price environment when things are going to improve?”
This article was written by Corey Paul from Odessa American, Texas and was legally licensed through the NewsCred publisher network.