Employment picture cools in the Permian Basin, Federal Reserve Bank of Dallas says
Employment in Texas’ Permian Basin – in a sign of cooling oil and gas activity – declined by 400 jobs through the first 10 months of 2019 after adding 16,700 jobs in 2018, according to the Federal Reserve Bank of Dallas.
For the year, employment for the oil and gas sector is down 4.7 percent in the Permian, the largest shale oil and gas producing shale play in the country.
Nevertheless, the overall unemployment rate for the region stood at 2.3 percent for the fourth consecutive month compared with a statewide rate of 3.4 percent.
“In October, mining, logging and construction, the Permian’s largest employment sector, contracted at 13.9 percent annualized, dragging total employment down,” the Federal Reserve said.
Oil and gas activity saw a 7.4 decline in the third quarter in the bank’s business activity index. “Oilfield services firms drove the decline,” the Fed Reserve said.
Equipment utilization was down to its lowest level since 2016, “suggestive of a large contraction in equipment utilization,” the bank said.
Permian Basin frack crews, who are brought in to get wells into production, are down 21 percent so far this year, according Primary Vision Inc. In 2018, frack crews in the West Texas and New Mexico oil fields grew by 1.3 percent.
Rig counts have also been trending down, and while the October the rig count rose to 417 from 414 in September; over the last year, the count has fallen by 72 rigs.
Still, in the third quarter Permian Basin oil production continued to climb, with production estimated to have reached an all-time high of 4.5 million barrels per day in September.
Another element contributing to the slowdown, according to analysis by Erika Coombs, an analyst with BTU Analytics, may have been oil company bankruptcies. There have been 30 through September, according to Haynes and Boone LLP.
“A sample of five companies who previously declared and then emerged from bankruptcy shows that all companies halted or significantly slowed completion activity for some period either before, during and/or after filing for bankruptcy,” Coombs wrote in her analysis.
The biggest bankruptcy filing in 2019 was by oil-field services giant Weatherford International, which filed in July with debts of $8.3 billion and assets of $6.25 billion.