The activity in RR Districts 1-6 continues to slow when compared to the previous quarter. Permits for new wells in Texas are 35% of what they were just one year ago. The Eagle Ford has 68 rigs running, with EOG, Pioneer, Conoco, and Marathon the most active. The other active plays in this region seem to be on ‘life support.’ In Houston, which is located in the heart of RR Districts 1-6, oil and gas companies of all sizes have announced additional companywide layoffs. Initially, these layoffs were reported to target the more experienced and higher paid land personnel, but now the layoffs appear to focus on personnel of all levels. Without major M&A activity in the last quarter, we expect to see more companies forced to sell assets or merge as a result of banks lowering their borrowing base. One bright spot on the horizon, there is legislation currently pending in Congress which would allow the export of oil from the US. If passed, it would provide needed relief to all the stranded oil and it would create jobs.
As the number of landmen looking for work increases, Cinco and other land service companies are experiencing a flood of calls and resumes. I have seen many of the incoming inquiries and I must say that Cinco is receiving resumes from some of the most talented landmen that I have ever seen. As a result, I started thinking about where in this current market environment, could there be an opportunity for such a high talent base, and I think I discovered a silver lining to what may appear to be just a dark cloud.
For companies that did not step into the Shale Revolution the first time around, the current market environment is now a chance of a lifetime to acquire a position while the barriers to entry are low. When I use the word companies, I am generally referring to private oil and gas companies, new start-ups backed by private equity, international investors, and state-owned enterprises (“New Buyers”). It excludes, at least for now, most public and domestic oil and gas companies that have more acreage than capital. Now insert the opportunity for work-seeking landmen – many domestic companies will be selling their non-core assets, looking for joint venture partners, trading non-consent interest for cash and a carry, as well as conducting a myriad of other trades in order to monetize their assets. Much of the work related to these transactions will be conducted by contract landmen, both in-house and in the field. If you connect with a “New Buyer”, these companies will typically need your services for a longer period of time as compared to Sellers, because New Buyers tend not to have a full in-house land department. So I urge you to keep your network fresh and if you have an idea on how you can help a client in a way they have not yet considered, let them know. Doing so could mean land work for you and others. At Cinco, we consistently receive great ideas generated by landmen working with us on projects, and these ideas lead to new work.
As always, check AAPL’s website for a plethora of industry news along with educational and networking opportunities at discounted prices. In closing, keep your skills sharp and your connections fresh!
by Randy H. Nichols, CPL. This article was originally published in Landman 2, American Association of Professional Landmen (AAPL). Mr. Nichols has been writing the Field Report for AAPL, covering the Texas region, since 2012.