Oil Rig Shutdown Nationwide Could Affect the Permian Basin - KWES NewsWest 9 / Midland, Odessa, Big Spring, TX: newswest9.com |

Oil Rig Shutdown Nationwide Could Affect the Permian Basin

Zora Asberry
NewsWest 9 

PERMIAN BASIN - More than 500 oil rigs may shut down in the United States over the next few months, which is the result of oil prices dropping by almost half. NewsWest 9 spoke with a few local companies to find out what affect this decline could have on the oil industry in the Permian Basin.

Locally, officials say we can expect anywhere between 60 to 100 rigs that could be out of business.

Operations Manager, Kim Knapp, at Byrd Oilfield Services said, "People hear that number and they already start to panic but if you do the geological graphics across the nation, it's not too many rigs shutting down. It seems like a large number but it's really not a panic time yet."

Most oilfield service companies seem to be on the same page, as Operations Manager, Tracy Elrod, of Wilkerson Oilfields Services agreed by saying, "I don't believe there's a reason to panic but there's not going to be as much work to go around as there was."

Rigs may begin to see less work starting early next year due to a 40 percent decline in the number of U.S. drilling permits issued between October and November.

"We expected this, we've had a very strong play over the past 10 years in the oilfield, and if you look at history, history always repeats itself and the play seems to shift. It will take its high peaks and then it will drop and then it will level out and then we'll have a peak again," Knapp said. 

Based on this anticipation, many oil producers have already announced that they're going to have smaller spending budgets in 2015.

"They're wanting us to do a 15 percent rate cut to keep everything flowing and to keep the work going. It will keep the work going, it will keep you afloat but your profit margin won't be as extreme," Elrod said. 

"The oil companies will re-adjust their production, they're going to lay off some rigs that maybe aren't doing so well in certain areas and then when the oil price comes back up to about $60 or above $70, you'll see these rigs come back into play," Knapp said.

There is no exact date on when these companies will be back on their feet but Elrod says that it may happen as late as the middle of next year.

"Next year will be hard on a lot people. You'll see a lot of companies have to close their doors. Many small companies will close their doors. But again, if they're smart and they just adjust their prices and stay with it a little bit longer, they'll be fine too," Knapp said. 
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