Once upon a time, every oilman you talked to in Texas claimed that the fracking-fueled oil boom that had triggered a Texas oil renaissance was never going to end.
Sure, the wells being drilled in the Eagle Ford Shale in South Texas and the Permian Basin in West Texas weren't cheap — it cost between between about $3 million and $5 million to use slant drilling and hydraulic fracturing to unlock the slick crude oil from brittle shale formations — but oil was hovering around $70 to $100 per barrel. As long as oil was selling at around $50 per barrel and up, the shale plays still pulled in plenty of profits for the oil companies.
Well, those days are long past.
The Texas oil industry has been hurting since oil prices began to sag back in June 2014. Even then everyone told everyone else the decrease was only temporary, but by January the low prices (caused by an excess of oil on the world market, as we've previously noted) led to layoffs in the industry. Globally, there have been about 19,000 jobs cut from Schlumberger, 1,500 from Chevron and more than 27,000 from Baker Hughes and Halliburton while the two companies continue to work for a merger. That means more than 28,000 jobs have been cut in the Texas oil and gas industry while other companies are being bought up and consolidated as the industry scrambles to readjust to get through the downturn.
But even with all these energy jobs ending up on the chopping block, the drilling in the Eagle Ford and the Permian Basin hasn't stopped, despite the cost of drilling and fracking these types of wells. In fact, production keeps increasing in the Permian Basin, and it's expected to go up by about 21,000 barrels per day to 2.03 million barrels per day next month, according Energy Economist.
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Of course, there has been a slowdown in the Eagle Ford: There are currently only about 80 rigs working the Eagle Ford, and new production capacity for both oil and gas has been hit hard since January, according to Drillinginfo. While the Eagle Ford was producing about 181,000 barrels per day in January, there are now only about 81,000 barrels per day coming out of the play.
But the thing is, these wells are still being drilled and the oil keeps on coming. Sure, shale production is expected to fall the most on record in November, continuing the decline of the past seven months, according to a forecast put out this week by the U.S. Energy Information Administration, but there's still a little room for hope: Even after all of this, they're still drilling.
Even though oil companies have laid off thousands and will likely go through more rounds of layoffs before things start to look up again, it seems there's still enough money around to drill in shale plays. Nobody drills for oil if he isn't making money from it, so we know that, even with prices hanging around $46 per barrel, the oil industry still thinks it's worth it to get the pricey shale play oil out of the ground and onto the market.
Sure, it's not the brightest of bright sides, but it's something.