Oil work activity in the Odessa Oil Fields has come a long way from the downturn in 2020. Things were so bad deep into that year, workover rigs were piling up by the dozens in burnt-out, broken fashion, being discarded versus repaired. The local “hospice” yards for fried equipment were seeing the biggest pile-up of dead units in their history. Worse, other working rigs were sitting and collecting dust, a clear sign something was wrong with the industry at the field level. Activity was dead.
Eight months of anguish had been rolling through Texas, and there wasn’t any relief in sight by the late summer and fall. Prices were down a third of where they were in January 2020, before the big slump hit. The brakes hit so hard on the Texas industry, some estimates put the losses as high as $85 million in the space of two-thirds of a year. It was clearly an economic downturn for the industry history books. At the same time, well over 107,000 domestic oil and gas jobs were liquidated as well since the full swing of the pandemic in late February. Texas alone racked up more than half of the U.S. job losses in the industry, but that figure didn’t include all the support services impacted as well.
Forget the News, Watch the Rig Count
Generally, everyone in the Texas industry watches the ongoing rig count. It’s an unofficial barometer of real-time commitment and activity of the movers and shakers, especially in the Permian Basin. To understand the impact of 2020 on the entire related economy as well as the Odessa oilfield services that depend on primary demand, one simply has to look at what happened with the rig count; it dropped from a working level of 450 rigs to 130 in the space of a month or two. Every rig, give or take, represents on average 100 jobs to run it. Any further convincing was done by looking at how fast the count for new drilling permits fell as well.
Hardened Service Veterans Now in Place
Today, the center of the Permian Basin is shared by Midland and Odessa oilfields, just like it has been in years past. Compared to other global resources, the Permian still remains the lowest oil producer for the U.S., which means that as demand returns in 2023, the region is definitely going to see the longest arc of use, being the last to drop in need before other more expensive areas fall to the accountant’s pencil again. However, the 2020 shakeup hit home; hundreds of direct operations and support services were hammered by the pandemic-related downturn. It weeded out a lot of weaker players, leaving only the strongest that pulled through.
No surprise, everyone is running the most efficient and lean operation they can, including Odessa oilfield services, which puts the survivors from the industry downturn in a very good position against any new market entries as things pick up again.
