The View From Down Here

I took the heir to The Wolf Camp fortune (official Son of the Wolf Pack) to the park this weekend to work out a little pent up energy (I’ll let you guess whether it was his or mine). Luckily, amid the various slides and swings, I stumbled into an excellent conversation with another father who was doing the same with his own progeny.

Let’s call our friend “John” for the sake of conversation. John was, like many in the industry, a tough-looking fellow. Attached to the end of a (too-long?) leash was a similarly tough-looking pit bull terrier. (Pit bulls, for whatever reason, are almost the official dog of the oilfield.) After a few moments, by way of introduction, John said, “You know, he won’t bite.” I knew no such thing, but thought chatting with John might be a good way from becoming dinner.

As it turns out (again as is relatively common in the industry), John was much more gregarious than he appeared to be at first glance – and we ended up having a fascinating (at least for me) conversation about the region and the industry. That is, after John confirmed that I was “from around here” (there are only two type of people in the oil patch, those of us from here, and everyone else).

Currently, John works for an oilfield services company here in town – one of the myriad of independents. Not too long ago, he was an “independent contractor” – one of a revolving crew for one of the larger e&p companies. That company just laid off (i.e. stopped contracting with) about 75% of the people who were hired on with them. As I’ve mentioned here before, this is not captured in the region’s unemployment figures for two reasons: 1. John’s coworkers – like many similarly situated “employees” – listed their full-time residence somewhere else; and 2. John was not, technically speaking, an “employee” of his “employer”.

One insight that John gave me during our talk was the difference between the downturns from the perspective of the people employed in the field. Specifically, he spoke of the difference between the 2008-2009 commodities crash and this one. He said, as I have felt as well, that this one just “feels different”. Interestingly, however, he gave a great fresh perspective to me about exactly why the feeling is different from the perspective of an employee, though.

For example, John talked about how, in the oilfield, there was a general sense that the 2008-2009 crash was going to be short-lived. When that crash happened, companies certainly cut back on expenditures. At the same time, however, most of these companies reassured employees and contractors that the contraction was a temporary hiccup. In short, during the ’08 debacle, the managers of these firms retained staff – even what he called “out-of-towners”… those people that companies brought in from other production areas like East Texas or Louisiana- with the understanding that they would be needed again shortly.

He went on to say that, despite what we’re hearing from corporate communications departments today, the view from the ground is much different this time around. As an example, in contrast to the prior period, all of the out-of-towners are gone already. They were either sent back to their home base, or sent home with a bit of change in their pocket and an offer of a good reference. Even some of the people who were “local” – which I gather means somewhere in the Permian Basin – were being let go, which he said never occurred in 2008. John also said that nobody, and he meant nobody, is trying to reassure anyone about the prospects for a recovery in the near future.

Finally, he intimated that a friend of his works for (Major Independent Company). His friend works in the back office, and said that the hedges (Major Independent Company) have in place start to break down once the price goes below much below $40. The last time he’d talked with his buddy, his friend felt safe. I asked how he thought his friend would feel now, and John said something along the lines of, “Not safe.”

It truly was fascinating to see the perspective from the ground-level. What is more, I think that discussions with the workers in the industry indicate a couple of things. First, these guys (most of them are men) are much savvier watchers of the market than I think even their own companies credit. Second, I think that the view from the ground floor shows that, despite the public statements to the contrary, even the so-called “safe” shale producers are starting to sweat low prices – and that they understand that “lower for longer” is the order of the day.

About Sennoma Civitano

You can trust me. I'm a law-yuh. Oh, and I have a Master's in Public Affairs. I read books. About things.
This entry was posted in Economics, Oil & Gas, Oil Prices, Public Affairs, Uncategorized and tagged , , , , , . Bookmark the permalink.

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