Register Today! Webinar on June 16 | Geopolitics & Energy – Supply Risks on the Rise

The Hidden Costs of Innovation


It should come as no surprise that when prices decline to a point where companies have to be drastically more efficient just to survive, any function or process in their enterprise that can be made more efficient and less costly will be transformed. The way our industry has responded has been truly remarkable, given that operational best practices continue to reduce breakeven prices across a wide variety of basins.

This progress however, comes at a personal cost.

A couple of days ago the New York Times published an article about the changing nature of oil patch jobs. Folks that used to be able to provide for their families by working the morning tour at a drilling rig, or working as pumpers and gaugers , are now finding that computers, SCADA monitoring systems, and automation are slowly but surely beginning to shrink the number of “blue collar “ jobs that the oil patch has always provided when times are good.

Laying out miles of seismic cable to connect long lines of geophones is becoming a lost art, and the onsite skills of tool pushers and company man–folks whose ears were finally attuned to the sound of mud pumps speeding up ,signifying a potential kick– are being “augmented” by remote monitoring technologies.

It is the great challenge for the American job market as a whole. Post the 2008 financial crisis, hiring did not rebound as many people expected it would since productivity gains that hard times required stayed in place. People got stretched to do more, they performed, and layers of non-essential functions across many industries were eliminated, never to return.
The parallel victims, of course, are the businesses that were created and expanded to serve the booming workforce that $90 oil supported. Whether it was the local restaurant, or laundry company, or double wide home enterprise, or even car dealerships and bass boat companies, lots of money was spent in anticipation that economic prospects would not only remain stable, but grow.

No telling how many loans were taken out, how many mortgages were issued , or how many high school students were assured that their educations were financially guaranteed.

This graph of median home prices in Midland gives a real sense of how optimism/growth began to flatten out as the oil price collapse began to take effect.

Source: Zillow

This graph from Odessa is even more telling, and probably better represents the folks that would be up ,dawn to dusk, tending tank batteries, throwing chain, or driving 50 miles for their shift on the evening tour.

Source: Zillow

However, in another part of the oil patch—in Marcellus country in SW Pennsylvania, home prices in Washington PA took a brief tumble in 2014 but have appreciated nicely since then.

Source: Zillow

This is pretty interesting. The differences may be due to the fact that housing prices in Washington might have been supported by royalty payments to local mineral owners who were NOT employed in the oil patch. so their net cash flow would have been accretive because their jobs weren’t affected.

It will be an interesting exercise to rerun this kind of back-of–the-envelope analysis when Marcellus wells have gone through a period of decline to see how folks are spending their money.

And given that operators are getting more efficient, and that decline in the Marcellus may be flattening out, the future of Washington PA may be ok…

Source: Drillinginfo

But it probably won’t be ok for a lot of folks in the patch.

I remember sitting a horizontal well in Frio county and we were tripping for a bit. It was night time, the weather was gnarly and the sky 10 miles away was full of lightning. And way up on the monkey board was a derrick man stacking pipe, with the wind howling through the location , illuminated every 20 seconds or so by the flash of distant lightning. He was doing the job that he had hired on for, and he was working to make a better life for his family.

Oil and gas has always stood on the shoulders of the hardworking men and women that get down and dirty to get their jobs done. Let’s never forget how much we owe them.

The following two tabs change content below.

Mark Nibbelink

Mark Nibbelink is co-founder and director of university outreach at Enverus. Before co-founding Enverus (formerly Drillinginfo) in 1999, Mark had a long career as a prospect geologist at Gulf Oil before beginning work as an independent geologist. Mark is responsible for quality control and data integrity. He received his Bachelor of Arts in geology and his master’s in geology and geophysics from Dartmouth College.