West Texas taking 'intelligent approach' to oil boom

A roustabout washes a drilling rig at a lease near Mentone. Many companies keep "Hiring" signs up to attract help. A roustabout washes a drilling rig at a lease near Mentone. Many companies keep "Hiring" signs up to attract help. Photo: Jerry Lara Photo: Jerry Lara Image 1 of / 6 Caption Close West Texas taking 'intelligent approach' to oil boom 1 / 6 Back to Gallery

MIDLAND - Nearly 30 years ago, Texas Monthly ran a post mortem on the Texas oil industry with a cover headline reading, "So long, it was fun while it lasted," and a forlorn James Dean figure hitchhiking out of town.

Back then, few would have argued, as the mother of all busts was destroying the West Texas banking industry, making oil barons into car salesmen and turning parts of Midland and Odessa into junkyards of rusting equipment.

Triggered by an oil glut that caused a relentless price decline, the West Texas crash of '82, and the long depression that followed, chased most of the industry majors out of the Permian Basin and an entire generation of oil field workers into other livelihoods.

"In 1983, they thought the oil industry in Texas was done," said Doug Robison, president of the Permian Basin Petroleum Association, who keeps a worn copy of the magazine in his office.

But, as the saying goes, the obituary proved a trifle premature.

As anyone who has tried to rent a house, navigate traffic or lease drilling equipment around here knows, the good times are rolling again. A strong demand for oil coupled with refined hydraulic fracturing and horizontal drilling techniques are tapping long untouchable, deep reserves.

What began a decade ago as a modest revival now is a full-fledged boom. The play extends across hundreds of miles of West Texas and into New Mexico, from Mentone east to El Dorado, and it is reviving long dormant backwaters.

The best indicator, the Baker Hughes rig count, recently hit 442, after bottoming out in 1999 at 51.

"I had a family emergency the other night and when I got back into town at 4 a.m., it looked like Interstate 10 because of the oil field traffic," said Crane County Judge John Farmer, who lives southwest of Odessa.

There are now more than 155,000 producing wells out here, generating revenue and requiring service for years to come.

"It's unbelievable. This has 50 years worth of life. They'll be redrilling the entire Permian Basin," exclaimed Jim Smitherman, chief executive officer of Security Bank in Midland, one of the few banks to survive the last bust.

Filling pockets

Airport hangars in Midland now are jammed with private planes, there's a three- to four-month wait to join the Petroleum Club and many of the service companies lining Interstate 20 keep "Hiring" signs out front.

A freshly graduated petroleum engineer can make $80,000 a year, sometimes with a $10,000 to $20,000 signing bonus tacked on. Roughnecks and truck drivers willing to work killer hours can gross over $100,000 a year.

From the first commercial well, drilled in Mitchell County in 1921, oil and gas have written the history of the Permian Basin, a vast ancient seabed riddled with hydrocarbons, where catastrophic busts have often followed spectacular booms.

The cycle this time around will be different, said Robison, president of EXL Petroleum. No longer does the oilman's fate depend solely on luck and the capricious price of oil.

Instead of hitting only one of 10 holes, some drillers who are tapping once inaccessible formations and using new extraction techniques expect to find oil most of the time.

"Historically, oil and gas has been a destroyer of capital," Robison said. "But that paradigm has changed. It's a new industry. If you can drill 200 to 300 new wells, and if every single one is economic, that greatly reduces the risk of loss of investment."

The boom also has sweetened royalty payments and lease bonuses for land owners.

"A 25 percent royalty is standard, and it's not unusual to find $1,000 to $3,000 bonuses per acre in really hot areas," said Arlen Edgar, 78, a longtime oil and gas investor. "There's a lot of money to be made. If you look at daily production in the Permian Basin, which is approximately a million barrels a day, that, along with the gas, represents $2.5 billion to $3 billion a month in production revenue."

Labor shortage

City leaders in Midland and Odessa are quietly digesting forecasts that, if the boom holds, their populations could double within two or three decades, creating an Interstate 20 metroplex of at least 400,000 people.

Since 2000, the combined populations of Midland and Ector Counties have risen by more than 40,000 people, to about 280,500, according to the U.S. census. Median family incomes have also increased by more than a third.

Sales tax income for Midland went from $13.4 million in fiscal year 2001 to $29.4 million in fiscal year 2011. So much money is flowing in that the city's reserve fund is now equal to about half its general fund, double what it used to be. The wealth has triggered an ambitious capital improvements program. Midland will soon build a new firehouse while remodeling two others, and will also build a new municipal court building. Extensive new roadwork also is planned.

So far, unlike the last big boom, which brought a Rolls-Royce dealership to Midland and conspicuous consumption to a level that suggested mental imbalance, this time around, people are being a bit more cautious.

"Euphoria has not set in, nor the craziness," Midland County Judge Bradford said. "This time you see an intelligent approach and more long-term planning, meaning more than this week's price of oil."

Although Midland Realtor Darrell McDonald manages more than 150 single-family rental homes, he rarely advertises for tenants.

"It's a horribly difficult lopsided market. I don't know how many calls we get every day asking if we have any properties to lease, and the answer is normally no," he said.

McDonald said the demand has driven up rental rates and sales prices for all homes. An ordinary brick veneer three-bedroom, two-bath home that rented for $1,000 a month seven or eight years ago is now going for twice that, he said.

According to City Manager Sharp, this year Midland issued a record 550 building permits for new homes, seemingly impressive until it is compared to the shortfall in single-family homes.

"We're about 5,000 units behind right now and that is growing," he acknowledged.

Housing hard to fnd

Evidence of the housing shortage is seen in the sold-out third-rate motels on Business 20, the crude RV parks and man camps springing up on roadsides, and in the frantic pleas on Craigslist in the "Housing Wanted" category.

"Help! Homeless in Midland/Odessa," reads one recent posting. "Is there any REAL places to rent in Midland/Odessa?" asks another. "Desperate Mom looking for Home," reads a third. "$2,000 - Looking for 3 bedroom house or apt," reads another.

Oil industry workers are trying to make the best of it, including a group of families living in an encampment of about 30 trailers on the interstate just west of Midland.

"We've been living here six months. This is our living room," said Toni Robertson, 46, sitting with friends under a canopy outside a white trailer, while keeping cool with beers and a water mister.

Bryan Robertson, 44, who drives a vacuum truck, works long hours, sometimes making $2,000 or more in a week. Even his son Brandon, 17, sees the need of it all, despite being far from his hometown friends.

"There's nothing to do here," he said. "But I'd rather be here than somewhere else and be completely broke. This is where the money is."

jmaccormack@express-news.net