As U.S. shale oil drilling rebounds, $80-thousand jobs find few takers

By David Wethe

Five years ago, the thought of $55-a-barrel oil would have given Piotr Galitzine heartburn. Now it’s keeping one of his steel-pipe shops in Houston open 24/7 and fueling a flurry of orders.

It’s stoking business for National Oilwell Varco Inc. too, with the oilfield-equipment giant for the first time in better than a decade selling more land-based than offshore gear. And it’s got Perry Taylor on the hunt for truckers to haul fracking sand. Even at $80,000 a year, jobs are hard to fill. “It’s tough,” said the chief executive officer of Agility Energy Inc. “We’ve got commitments that are very difficult to keep right now because we can’t get the drivers.”




Crude is nowhere near its $100-plus highs of recent years, but drillers pounced after it steadily crept back up from the $26 bottom it sank to early last year. And as they tap more and more new wells, the rebound is spreading quickly, and powerfully, to the oilfield-services outfits that were so hard hit during the collapse.

“Everyone is so hungry,” said Joseph Triepke, founder of the industry research company Infill Thinking in Dallas. “It’s like we’re hanging a steak in front of a bunch of starving people.”




That services companies are hopping again with crude worth half what it was three years ago is thanks in large part to technological advances that help explorers to find more pockets of petroleum riches, and to drill faster and frack smarter. That last bit is key in the shale formations that hold the most promising on-land pockets of oil and gas; tapping them requires fracturing the surrounding rock with injections of water, sand and chemicals.

To be sure, this boom could be fleeting, and some fields are rocking and rolling a lot more than others. The Permian Basin in West Texas and New Mexico is the hottest because its pancaked layers make it the easiest to drill.

The burst of activity has helped drive U.S. oil output up at a faster rate than during the last surge, with an average 125,000 barrels a day added since September. Now exploration and production spending in the U.S. and Canada is on track to climb four times more than the worldwide average this year.

And Galitzine, CEO of pipe-supplier TMK Ispco, the U.S. unit of Russia’s TMK PJSC, said he has started hiring again. “Every time I push that computer button that says ‘approved’ on the rehire, I feel better.” He’s pushed it roughly 300 times so far in the past four months, bringing the payroll to the highest it’s been since the start of 2016.

Galitzine, though, doesn’t feel comfortable yet. “When we were at $100, to look at $50 would have been very scary.” Now, the confidence $100 used to instill can probably be had at $65, he said. “That’s how much cost has been squeezed out of the supply chain. So $65 is the new $100.”

Maybe, but meanwhile the costs of tapping the riches in mile-thick stacks of Permian Basin rock have been kicking up. Companies are paying as much as $60,000 an acre for drilling rights, a 50-fold increase from four years ago, according to Wood Mackenzie Ltd.

Some of the newest, most technologically advanced rigs available for rent from Nabors Industries Ltd., the world’s biggest land-rig contractor, are commanding more than $20,000 a day, up from about $17,000 last year. U.S. Silica Holdings Inc., the biggest publicly traded sand supplier, is seeing the average price of sand at about $35 per ton, 20 percent higher.

“It’s deja vu all over again,” said Bryan Sheffield, chief executive officer of Parsley Energy Inc., who’s slated to be on a panel at the CERAWeek conference in Houston on March 7 about the Permian Basin’s potential.


Can it last? The answer, as usual, will depend on the pesky supply-demand puzzle. The metric Galitzine is keeping his eye on is how much the shale drillers are erasing crude cutbacks from Russia and the 13-member Organization of Petroleum Exporting Countries, which agreed in November to trim output by 1.2 million barrels a day.

“For every barrel that OPEC cuts, the American shale drillers are putting on half a barrel. If that remains, then I think we’re okay.” If shale fields start churning out much more, “then who knows what’s going to happen to the price of oil,” he said. “Probably nothing good.”