Crude oil was briefly sold at a negative price per barrel this year. Now, the industry is working to move in a positive direction.
Up and down the oil and gas value chain, businesses have experienced challenges since the pandemic arrived on U.S. soil. Long-term contracts enabled one Victoria oil industry business to have work throughout the year.
Tejas Production Services, 7303 Houston Highway, handles construction and engineering for the oil industry’s technology. For example, the company designs and welds pipes and machinery to be used on drill sites in the Eagle Ford Shale, Permian Basin or other job sites around the world.
The local business’ CEO, Hunter Follett, said a business like Tejas does the work that needs to be done to maintain all the others in oil services.
“Broadly speaking, oil services is the arms and legs of the oil industry,” Follett said.
While the industry works to retain revenue and staff, Follett said long-term partnerships with “some really blue chip customers” from the past two years enabled Tejas to have work in 2020.
Tejas works with businesses in other sectors in the industry, but some of those businesses are more susceptible to price changes and consumer demands than oil service providers.
Crude oil production in District 2 peaked this year in March with about 460,000 barrels daily according to records at the Texas Railroad Commission Oil & Gas Division. This is mirrored by the district’s 11 active rigs as of Oct. 30.
District 2 includes Bee, Calhoun, DeWitt, Goliad, Jackson, Karnes, Lavaca, Live Oak, Refugio and Victoria counties.
Production then dipped to just below 350,000 barrels in August, according to preliminary records at the Texas Railroad Commission. Some corrected and late reports may still be added to preliminary production records.
Statewide oil production decreased from about 5,400 barrels a day in March to 4,700 barrels a day in August, according to the U.S. Department of Energy. Production levels are still higher as of August than a decade ago, but the impact of lower demand for oil and gas than just a few months ago continues to affect each step of the value chain.
Exploration and production of oil and gas, also referred to as upstream, begins the value chain.
Exxon Mobil, a company that generally works earlier in the oil production value chain, reported 1,900 job cuts Oct. 30 as reported by the Associated Press. The company stated it plans to cut another 11,250 jobs by the end of 2021 worldwide. This came as Chevron also made job cuts.
Follett said Tejas experienced about 5% to 10% reduction in its workforce, which is about 10 fewer people, since January.
DeWitt County includes part of the Eagle Ford Shale and is one of the only Crossroads counties to hold some of the shale’s resources.
In DeWitt County, the first and third largest groups filing state unemployment claims were from the support activities for oil and gas operations and oil and gas pipeline construction sectors between Sept. 23 and Oct. 24, according to the Texas Workforce Commission.
As for another metric of the oil industry’s health, oil prices returned from below zero.
West Texas Intermediate futures closed at $38.60 on Tuesday. Now hovering around $40 per barrel since June, prices remained relatively consistent since bouncing back from an unprecedented dip to negative $37.63 per barrel on April 20 for the first time in the history of WTI futures trading.
Along the oil and gas value chain, businesses have consolidated, or even simply declared bankruptcy, since the pandemic arrived.
Two large oil producers consolidating are ConocoPhillips buying Concho Resources, according to the Associated Press.
At $9.7 billion, the deal would make the two Texas-based companies one of the largest American oil producers.
As a servicer and manufacturer for upstream companies, Follett said the deal is “good not just for (ConocoPhillips) but for the region.”
Additionally, oil service provider businesses are experiencing buyouts, bankruptcies or forms of consolidation.
“There’s a significant amount of market opportunity available for grabs in a recovery from just the consolidation and evaporation of competition,” Follett said.
After some oil industry operators made it half-way through a project and then filed for bankruptcies, Tejas picked up incomplete jobs.
Additionally, some businesses attempted to complete projects normally outsourced to oil service providers. When those projects weren’t completed correctly, Tejas stepped in.
“Consolidation has brought us business and then that becomes a client of ours,” Follett said. “On the other hand, all clients are spending less. So we’re getting a higher market share of a smaller pie.”
Despite this, Tejas grew almost tenfold since being bought in September 2018, Follett said.
Utilizing what Follett said is “legitimately the best engineering team in the business,” he wants to hit the ground running in the economic recovery.