New Mexico oil and gas drilling plummets - New Mexico Business Weekly:

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Jason Sandel, executive vice president of in said the sudden reductio n in activity since last fall hasbeen startling. “The numbed of drilling rigs that have shut down almost instantaneouslty throughout all companiesand operations, combined with the lengtg of time producers say they will remaih down, makes this situation unique,” said who is also a Farmingto n city councilor. “There were some tough timews in the 1980sand 1990s, but what we’re facing right now is about the worsr we’ve experienced.” When drilling activity drops, everythingt else follows close behind, Sandel said.
As of 24 of the 41 drilling rigs assignec to the San Juan Basin in northwesterj New Mexico hadceased operations. “Drillinvg is always the firs t service impacted ina downturn,” Sandel said. “Everythinh else follows suit, because if there’e no drilling, then there’s no equipment or water to be haules and no compressorsto operate. The idling of drillinhg rigs is really justthe beginning.” Free-falling prices are a majofr problem. Oil for February deliver fell below $35 per barrel this week on the , down from a peak of $147 per barre last summer. And, natural gas prices are currentlgearning $4.
83 per 1,000 cubic compared to more than $6 per MCF last Industry representatives also blame adverse environmental regulations, especially new statwe rules on the management of oil-and-gas pits that took effect in New Mexico last June. “Th e overzealous and out-of-control regulatory environment makes it very tougg to do business inNew Mexico,” said Bob Gallagher, presidenrt of the . “I’d say that’s even a bigged concern than price Sandel said restrictive regulations and declining prices make for akiller “I see it as the perfecty storm,” Sandel said. “Both declining prices and the risiny cost of doing business are causinfthe downturn.
” Estimates on layoffs are not yet said Margaret McDaniel, directofr of the . “The numbers are just starting totrickld in, but basically everything is slowinbg down,” McDaniel said. Sandel said at leasft 552 drilling workers have been laid off in the northwestermn quadrant ofthe state, sinces each drilling rig includes 23 workeres and supervisors, and 24 rigs are currently shut down in the San Juan The layoffs include 200 of Aztec’s 750 Sandel said. Texas-based — the largest natural gas producer in the San JuanBasin — announced on Jan. 16 that it will lay off aboutg 4 percent of its globalwork force, or nearl y 1,350 employees worldwide.
“There haven’tg been any layoffs in New Mexicol yet,” said spokesman Jim “We need to first assess where it will take but we’ll make those announcements in a few The situation is similar in the Permian Basim in southeastern New Mexico, said Raye Miller of Artesia-base “The southeast part of the state is seeing significanf reductions in rig Miller said. “We had five rigs contracted to us last year andnow we’ree down to four.
We’rew about to go down to three, and if prices don’tg improve, we’ll go down to two in the next few Most other companies operating in the Permian Basin are alsocutting back, including and , Millerd said. “The situation is basically the same for all companies in the and if production companies are cutting then the service companies that work for them are alsocuttinfg back. It’s happening pretty much acrossathe board.
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