With the price of oil nosediving, energy producers are slashing their spending and pulling back on new drilling — which means major job losses in the Eagle Ford Shale are a near-certainty.

Cutbacks and layoffs already are underway in the 26-county shale play.

The price of West Texas Intermediate, the U.S. benchmark crude oil, dropped to $22.39 as of 5 p.m. Wednesday, hitting its lowest level since 2004.

At that price, producers can’t profitably drill for new pockets of oil or undertake many of the other capital projects they’d planned for 2020. One result will be job cuts, said Paige Meyer, an energy analyst with CFRA Research.

Dragging down the global oil market is a combination of “demand shock” — with fewer motorists filling up their vehicles because of coronavirus-related closures and travel restrictions — and “supply shock” as Russia and Saudi Arabia boost production in a battle for market share, Meyer said.

“We have never seen this before — to have a demand shock and a supply shock at the same time,” she said. “It’s unprecedented.”

In the past two weeks, 21 oil producers have cut capital spending by an average 40 percent for the rest of 2020. Meyer said six of the companies are oil producers in the Eagle Ford, which stretches 400 miles from the Bryan-College Station area to Laredo.

“A lot of companies are in trouble,” she said.

Among the oil producers working in the Eagle Ford that have announced spending cuts in the past several weeks:

Murphy Oil Corp. said it’s reduced its capital budget to $950 million, a 35 percent reduction. The company is “releasing operated rigs and frac crews in the Eagle Ford Shale, with no operated activity planned for the second half of 2020.”

Marathon Oil Corp, said it’s slashing $500 million in projects. The reductions include “optimizing development programs in the Eagle Ford and the Bakken Shale play, which cover North Dakota, northeastern Montana, southern Saskatchewan, and southwestern Manitoba.”

Matador Resources Company said it would continue to “pursue divestitures of portions of its non-core assets, including possible sales of leasehold and mineral interests in South Texas.”

EOG Resources and Devon Energy Corp., on the other hand, announced plans to focus their exploration efforts on the Eagle Ford and Delaware Basin in West Texas.

DeWitt County Judge Daryl Fowler is witnessing up close producers’ skittishness in the Eagle Ford. He’d heard this week that a natural gas exploration company walked away a deal to lease additional land in his county.

“More than likely it is a cash flow problem,” he said. “It seems companies are beginning to take pause, surveying the economic environment and the and supply and demand of the project, and adjusting capital projects accordingly.”

The forecast for rural DeWitt County is grim. Fowler said 83 percent of the South Texas county’s approximately $45 million budget comes from tax revenue from the oil and gas industry.

DeWitt County has experienced both booms and busts over the last 10 years. The fracking revolution ushered in a gold rush of economic activity from 2010 to 2014, but oil price collapses had resulted in significant layoffs by 2016.

Oil and gas industry workers are nervous.

At the Maya Mexican restaurant in Cuero, the small county seat of DeWitt County, three oil-field service workers eating dinner last week said there were widespread worries that layoffs are coming.

“If prices stay this low, a lot of workers will lose their jobs,” said one employee, who declined to be named because his company doesn’t allow workers to speak to the media.

Oil prices could fall even further — as low as $20 a barrel in coming weeks, Meyer said.

It’s unclear how quickly producers will cut jobs. Fowler said layoffs may occur over the next few weeks and months, as oil-field service firms wrap up contract work that’s already underway.

Compounding oil producers’ troubles are the huge debts they’ve accumulated, borrowing when times were good to fund capital projects, said Dennis Elam, an associate professor of accounting at Texas A&M University in San Antonio.

Dozens of oil companies have gone bankrupt over the last several years — before the oil war between Russia and Saudi Arabia and global panic over the coronavirus threatened to cut demand. Elam, who specializes in oil and gas accounting, said more bankruptcies and layoffs are likely this year.

“Unless there is a quick rebound in oil prices, some companies won’t make it,” he said.

Oil producers’ cutbacks are a dire sign for the industry, which depends on new production, said Thomas Tunstall, senior research director for the University of Texas at San Antonio’s Institute for Economic Development.

Many energy companies struggled last year to make a profit when oil prices were around $50. The recent price drops will significantly ratchet up the pressure on them.

“If the companies don’t have the cash flow, they may have to reduce workers,” he said.

randy.diamond@express-news.net