‘10/12 Industry Report’: Adapting to survive, oil patch owners move to shale

    In recent years, most oil patch owners, contractors and suppliers have learned the hard way that they must either adapt to a leaner low-oil price environment or suffer the consequences. This is especially true in the world of offshore oil, as 10/12 Industry Report details in a feature from the first quarter issue.

    This is especially true in the world of offshore oil, where dwindling returns are sending many to the shale plays.

    The direness of the situation is apparent across a wide swath of south Louisiana. Houma, Lafayette, Thibodaux and other communities have suffered sharp increases in unemployment, with rates almost doubling since 2014. Moreover, the hiring of new graduates from universities and trade schools has been dialed back from historic highs, and fabrication yards once filled and backlogged have become ghost towns.

    BP’s projects general manager Ryan Malone summed up the situation during his keynote speech at the Louisiana Gulf Coast Oil Exposition in Lafayette last fall.

    “These unprecedented reductions impacted many of you in this room and your businesses don’t look the same today as they once were,” Malone said. “Like many of the majors, we were faced with making reductions in our capital spending, and we did this so that we could map a sustainable business for the long downturn in commodity prices.”

    Turning a profit offshore has become a tenuous proposition, so the shale plays—particularly the Permian Basin—are attracting owners in droves. The Permian is largely contained in western Texas and southeastern New Mexico, and has experienced a revival of activity as the oil and gas industry’s interest in unconventional resources grows along with new technologies.

    “You’re down to just the majors and super-independents that can actually be out in the Gulf anymore,” says Gifford Briggs, vice president of the Louisiana Oil & Gas Association. “Why would you go when you know that for $9 million you can drill a well, do a 10,000-foot lateral, get ‘X’ production off of that, and it’s almost 100% guaranteed? The risks are much higher in the Gulf, where you could spend $1 billion or $2 billion … and that’s not guaranteed.”

    Read the full feature, check out the complete first quarter issue of 10/12 Industry Report and sign up for a free subscription. Send your comments to editor@1012industryreport.com.

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