When the stampede for acreage in the Delaware Basin began in 2016, many across southern New Mexico had already given up on the state’s oil patch and left for jobs elsewhere. Despite a steady recovery, the previous two years of free-falling prices clearly took a toll on the local economy.
Eighteen months later and New Mexico is firmly at the center of a broader national comeback by the oil and gas industry. Last year, New Mexican output was nearly 470,000 barrels a day, up 17 percent from the previous year and more than doubling since 2011. New Mexicans haven’t seen an upswing in output like that since the 1960s
The revival of the state’s oil sector has brought new employment and investment opportunities. Those opportunities are increasingly among the oilfield service companies that handle the drilling and day-to-day operational activities for the big producers.
My company, Canary, LLC, is among those investing in New Mexico. In late 2017, Canary acquired Artesia Field Services, a local firm with decades of experience in the Delaware. The increasing pace of drilling activities in the region – drilling rigs are literally being utilized around the clock – has prompted us to expand our operations and double our staff.
As Canary’s CEO, I am betting on New Mexico because I believe the state’s oil sector has the capacity to continue to grow into the next decade and beyond.
New Mexico recently overtook Alaska and California to become the nation’s third-largest oil producing state, thanks in no small part to the hyper level of activity in the Delaware, part of the prolific Permian basin.
The U.S. Energy Information Administration projects production nationwide will top 11 million barrels a day by the end of the year, putting America on pace to surpass Saudi Arabia and Russia as the world’s top producer.
Globally, only Saudi Arabia’s gigantic Ghawar Field, at 5 million barrels a day, produces more than the Permian’s 3.1 million barrels a day. Pioneer Natural Resources estimates the Permian, a formation that includes west Texas and southern New Mexico, could ultimately prove bigger than Ghawar. Analysts at IHS Markit estimate the Permian Basin holds as much as 70 billion barrels of oil.
With the Permian established as the primary engine of U.S. oil production growth, New Mexico is reaping the economic benefits of the largest expansion in the industry’s history. According to the New Mexico Oil and Gas Association, oil companies invested more than $13 billion in the state last year. To put that in perspective, the industry spent roughly $95 billion in all of North America in 2017.
The current wave of investment in the Delaware is stimulating the economy, driving job creation and filling government coffers. While New Mexico’s 5.8 percent statewide unemployment rate is higher than the national average, our managers struggle to find qualified employees to keep up with demand. Those who stayed and weathered the downturn are growing increasingly confident in the strength of the economy.
Analysts predict investment in the Permian will grow by more than 20 percent before the end of the year. At Canary, we’re pumping $750,000 into our Delaware operations – all of it flowing to local businesses – to keep pace with the growing demand.
As spending on drilling activities increases, our industry will continue to need more roughnecks, truck drivers, construction workers, as well as bookkeepers, accountants and engineers. All of these positions – whether in the field or the front office – pay the kind of wages that support a family.
The oil industry will always be prone to booms and busts but the Permian was one of the few basins in the world to increase output after the market collapse of 2014, thanks to a low breakeven cost of roughly $33 a barrel. That means companies like mine and the investments they make will be here for the long haul.
At Canary, we’re proud to carry on the tradition of hard work and community investment that was the calling card of Artesia Field Services. The oil and gas sector in New Mexico has a bright future and we want to be a part of it.
Dan K. Eberhart is CEO of Canary, LLC, the largest independent oilfield services company in the United States with operations in every major shale play.
This column was originally published in the Albuquerque Business Journal on May 29, 2018.
