The Drop of Oil Prices Have Forced Cutbacks at Small Companies
The plunging price of crude has inflicted pain in the Oklahoma oil patch, and now it is threatening to take out the smallest of the small operators, those that have survived decades of booms and busts.
Moran Oil Enterprises is losing $5 on every one of the 205 barrels it produces every day, forcing it to borrow $30,000 this month to meet a payroll that includes 24 employees and contractors.
Ms. Wallace’s firm is among the 7,500 small, mostly privately owned businesses that operate more than 400,000 aging oil wells nationwide. They are commonly known in the industry as “strippers’’ because they strip out the last barrels.
Frequently family owned, and passed on from generation to generation, the stripper wells each produce at most 15 barrels a day. But collectively their production is significant, generating about a million barrels a day, or more than 10 percent of national production.
Sales tax receipts in this town of 7,500 are down 15 percent this fiscal year, and farm roads around Seminole County connecting the oil wells are suffering because many producers are saving money on gravel, which they customarily hauled and spread to protect their pickup trucks from wear and tear.
The tiniest oil companies represent the backbone of scores of rural communities in around two-thirds of the nation’s states, including Texas, California, Illinois, Louisiana, Ohio, Kansas and Kentucky, and employ more than 150,000 workers.
Leading members of the stripper well industry say their companies are now so financially stressed that if oil prices remain at the current levels for many more months, as many as half of the nation’s stripper wells could be shut off by the summer or by the end of the year at latest. All it takes is a simple flip of the switch to halt power to the pump in most cases.
American oil production, which peaked at 9.7 million barrels a day early last year, has come down by about half a million barrels a day despite an increase in offshore Gulf of Mexico production and the resilience of many shale fields.
Much of the reduction probably comes from stripper wells already shut, though estimates vary since the marginal wells are scattered and unevenly monitored by the government and analysts who focus on public companies.