As the U.S. oil & gas rig count plunges to a record low for the second week in a row, oil and gas experts are beginning to worry about the long-term effects of the downturn, especially on smaller, independent oil producers.
Spencer Klotzman, a Victoria attorney who specializes in oil, gas and mineral law, said such companies are particularly susceptible to the downturn not just because of their size compared to giants such as Exxon and ConocoPhillips, but because of their reliance on private equity firms rather than banks.
“The big lesson of the 2014 crash was that banks really stopped lending to a lot of these producers, so private equity stepped in,” Klotzman said.
It’s likely these private investors may pull out, and that acreage currently being developed by small companies may get transferred to larger companies, he said.
“During the downturn, a lot of what happens is dependent on who their investors are and their tolerance,” he said. “It seems almost inevitable there will be some consolidation of acreage.”
Earlier in May, the Texas Railroad Commission dismissed a vote on prorationing oil rates, which some people, including Klotzman, believed could have helped stabilize the price of gas and help smaller companies survive.
Karr Ingham, of Amarillo, is a petroleum economist for the Texas Alliance of Energy Producers, which represents small, independent oil companies.
More than the producers going out of business, Ingham said he worries about their employees and the ripple effects on other parts of the industry, such as service companies.
“A company may be able to survive this, but who’s not going to survive this is the people who work for them,” Ingham said. “When companies cut costs in an effort to stay a float, in many cases the first thing to go is labor.”
As businesses begin to reopen, new features of the local retail environment, including virtual showrooms and expanded online shopping, may be an early indication of COVID-19’s permanent effects.
During a town hall meeting hosted by the Victoria Advocate, local shop owners said adaptability was essential for survival during the shutdown. Some of those adaptations, including expanded online shopping and full scale renovations, may change the way people think about small-town retail, they said.
|•Editor’s note: These counts are updated daily.|
Eveline Bethune, owner of Texian Books, Melvins Menswear and Bethune & Son, said she began moving her stores’ inventory online in March as shutdowns began.
For the small-town bookstore, the change may mean the ability to compete with Amazon. Bethune said some of her local customers are able to get same-day delivery.
“We were able to pick up quite a few new customers,” she said.
Pat McDonald, owner of Days Gone Bye!, said the pandemic reinforced a lesson she’d already learned from owning a small business: People like communication and personalization. She said what enabled her to cope with the shutdown was the ability to add a personal touch to the experience of online or remote shopping. McDonald distributes her cellphone number so customers can reach her with questions about items in her store.
“They have learned how to shop online a lot better than they have before,” she said.
She said she also became a personal shopper for people who requested that service.
Unlike the gifts and clothing sold in McDonald’s store, furniture is a bit harder to adapt to online sales, said Paige Streiff, owner of Victoria’s Ashley HomeStore.
“Our items are bigger ticket,” Streiff said, and, before dropping substantial amounts on furniture, “people want to see it, touch it, feel it.”
To adjust the business, Streiff said, staff members have added a chat option to the store’s website. She also made the entire store’s inventory available via virtual tour, which allowed her to renovate the showroom in the Northcross Shopping Center.
Although sales were initially down after the shutdowns, Streiff said the changes to her business allowed her to take advantage of a recent surge in sales.
“When you’re on the bed or the couch all that time, you get to thinking about how you need a new one,” she said about the time spent in self-quarantine.
On Sunday, no new cases of COVID-19 were announced in Victoria County or in any other county in the Golden Crescent. A total of 156 people have tested positive for COVID-19 in Victoria County, and 129 people have recovered from the disease. Seven people have died.
Since the beginning of May, only two new cases of COVID-19 have been announced in Matagorda County. A total of 66 cases have been identified in the county; 37 have recovered and 5 have died.
Matagorda County saw one of the region’s biggest spikes in cases early in the pandemic.
“We’re feeling good about the trend,” said Matagorda Regional Medical Center spokesman Aaron Fox.
Nevertheless, he said residents are still being cautious as they begin to venture out to local businesses, Fox said.
“The light at the end of the tunnel is real,” he said. “I think that we will get there, but we definitely have a ways to go.”
Victoria’s small businesses that have taken a hit from COVID-19 can apply for help starting Monday for up to $50,000 in a new loan program.
“I thought it was a beautiful thing when I heard the City Council voted for this,” said Pat McDonald, owner of Days Gone By! on Friday. “This is just a real plus and a real way to help Victoria.”
The city is providing a total grant of $500,000 to PeopleFund for the program. Of that, $345,000 will be provided as loan capital that will be available to small businesses. PeopleFund’s match of $500,000 will go entirely toward the loan capital fund, creating a total loan pool of $845,000.
Like most other small businesses, Days Gone By! has suffered financially from the impacts of COVID-19, McDonald said. But, she said, she’s remained optimistic and has found ways to safely adapt and continue operations as much as possible throughout the pandemic.
“As a family, we have a saying that when there’s a roadblock, we will figure out how to get through it, get around it or hurdle over it,” she said. “So we did what we could to keep going through this.”
Before Tuesday’s meeting, the council considered and voted down a similar agreement with LiftFund. A main point of disagreement about that partnership was the potential creation of a Dream Makers Fund. In that fund, as loans were paid back, the money would go to provide new loans to small businesses in Victoria.
Since, the city has continued to search for different options to provide small businesses help. At their meeting on May 12, the council discussed two options: the loan program with PeopleFund and a grant program.
The grant program would have provided grants up to $10,000. It would have been administered by the city and had an evaluation committee, including the city, the Victoria Sales Tax Development Corp., the Victoria Economic Development Corp. and the Victoria Chamber of Commerce.
Through the loan program, more money will be given to businesses than if the city chose to distribute grants, Mayor Rawley McCoy said. And because of the minimal risk, he said, he believed the loan program would give businesses “a far better chance of succeeding.”
“How long is this situation going to last? The truth is, we don’t know,” he said. “We don’t know how long it’s going to last. And I think we should prepare ourselves to help preserve as many businesses in our community as we can.”
Council members Mark Loffgren, Jan Scott, Josephine Soliz and Rafael De La Garza voted with McCoy in favor of the program. Council members Andrew Young and Jeff Bauknight voted against.
“I don’t think it’s an economic development issue,” Bauknight said Tuesday.
To be eligible for a loan, a business must have sustained financial losses because of COVID-19; must have a physical address in the city; must be up-to-date on city and county property taxes; and must have good credit with a minimum credit score of 600 as of Jan. 31. Exceptions to these requirements may be considered on a case-by-case basis by PeopleFund.
Loans will be provided at 0% interest for the first six months. After that time frame, the interest rate will increase to a maximum of 5%. Interested businesses can apply for loans up to $50,000.
McDonald said she is considering applying for a loan to help Days Gone By!. Regardless, she said, she’s confident the loans will help small businesses.
“I was thrilled to death when this came out,” she said. “Whether it helps us or some of Victoria’s other small businesses, it’s great.”