Times Tough in Oil Patch : Producing States’ Economies Hurt by Glut

John Cassidy’s business is booming and that is bad news indeed for the oil patch.

Cassidy buys used oil-field equipment, and from a hilltop just outside Stroud, he points to his storage yard filled with millions of tons of rigs and giant motors--and everything else needed for drilling--that he has purchased in recent months for little more than the price of scrap metal.

By his own reckoning, Cassidy now owns more spare oil-field paraphernalia than anyone else in the world. He is betting on the come--that sooner or later the oil business will turn around. When it does, he will be ready.

“If we had this much stuff when it was selling good, we could have moved someone out on the Forbes 400 list (of the nation’s richest individuals),” he said.

The fact that Cassidy has so much equipment is a telling indicator of how bad things are in the oil business. And he plans to buy even more at auctions that are proliferating around the Southwest, from Oklahoma City to Odessa, Tex.

But if Cassidy can see a silver lining in falling oil prices, Jack Dowdy can see only the cloud. Dowdy was laid off as a mechanic and truck driver for an oil company in early March. So was his 19-year old son, James. Now, after working 20 years in the oil patch, Jack Dowdy can’t find a job--any kind of job.

“It’s scary,” said Dowdy, who now wonders whether his other son, a high school senior, will be able to go to college or will have to go into the military instead. “I’ve never been where I can’t find a job,” he said. “It’s worse than I’ve seen in my lifetime. I’ve worked 20 years in Stroud, and I know everything that’s going on. But nobody’s doing anything.”

John Stobaugh is having similar difficulties. Stobaugh, who was laid off from his drilling job on the first of the month, said his company drilled only three wells last year. Then work stopped altogether when the price of oil began plummeting.

“It kept dropping and dropping,” he said. “All the drillers who had been there a year got 40 hours guaranteed work. When we lost that, we knew that was it. I’m fixing to try to go back on the road and drive truck. That’s all there is to do.”

At the Lincoln Tank Service, Percy Bolen, who makes his living hauling away salt water pumped from oil wells around Stroud, was sitting in his small office talking about oil with some friends in the business. Bolen’s work is down to zero. Outside, rain cascaded down on his pumping trucks as they stood idle outside a corrugated metal garage.

“You reach a point where you can’t make any money,” Bolen said.

Ed Landers agreed. Landers, an independent driller and producer, said there is no point in pulling oil from his wells, what with the price of a barrel of crude hovering at about $12, less than it would cost him to extract it from the ground.

“We’ve shut a bunch of our oil wells down,” said Landers. To which Bolen responded, “So when he shuts down, there goes my water hauling.”

Bad days in the oil business? As Joe Wunderlich, a Stroud oil production superintendent put it: “What oil business?”

Common Plight

The plight of Landers, Bolen and Wunderlich is common throughout the oil-dependent states of the country. While the rest of the nation benefits from lower oil prices, states that base their economies on crude oil production are foundering.

Texas economists expect a $1.3-billion shortfall in state funds this year because of reduced oil revenues, and a rule of thumb used in the state is that 25,000 jobs are lost for every $1 reduction in the price of a barrel of oil. Louisiana estimates that for every $1 drop in the price of oil translates to $45 million less in the state coffers. Oklahoma is figuring on a $473-million shortfall for 1986 on a budget of $2.5 billion.

“While the rest of the country is enjoying lower prices, Texas, Oklahoma and Louisiana are suffering,” said John Reid, a spokesman for Oklahoma Gov. George Nigh. “It isn’t good.”

And as the weeks go on, more and more companies that were once prosperous are having to call it quits rather than send good money after bad.

“I’m getting more bankruptcy notices each week than I am checks,” said Bolen, the tank truck operator.

In Houma, La., 340 workers will lose their jobs by July 1 because Raymond Fabricators, an offshore platform construction company, is closing its doors. And that is only the latest in a string of closures. In nearby Morgan City, Ray Oubre, a tug boat captain servicing rigs in south Louisiana, has taken to building custom duck blinds (he calls them “Duck Busters”) to help make ends meet.

State Rep. John Saracusa, whose district includes Morgan City, said he made a recent driving tour of the town the other day and counted 42 businesses that had closed down.

“This thing don’t look good at all,” he said. “From what we hear, there’s nothing down the road.”

Firm Went Bankrupt

In Texas, Global Marine, a Houston-based offshore driller, filed for bankruptcy, citing dwindling oil prices. Global Marine’s troubles are indicative of what is happening in the rest of the state.

In Lone Star, east of Dallas, about 2,000 of the 3,800 employees of Lone Star Steel were laid off earlier this month. Company officials blamed the cuts on a depressed market for oil-drilling pipes, tubes and well casings, Lone Star’s primary market.

“Texas is facing a real financial crisis, to say the least,” state Comptroller Bob Bullock said recently. “We don’t look for the situation to get much better. It’s possible it may get much worse.”

In Midland, in the heart of the rich west Texas Permian Basin, the oil patch depression is the staple of Sunday morning radio preachers, who implore listeners to give extra offerings for laid-off workers.

Still, Oklahoma, may be going through the worst economic times of the lot.

The state’s two main industries are oil and agriculture, both of which are suffering. Oil alone accounts for one-quarter of the state’s revenues and two major companies, Kerr-McGee Corp. and Phillips Petroleum, announced layoffs earlier this month.

Alexander Holmes, an economist at the University of Oklahoma, said the state’s problems are compounded because two-thirds of Oklahoma’s oil wells are what are known as “stripper wells,” those producing less than 10 barrels of oil a day. He said that if the price of oil remains low, those wells will be capped and would probably remain closed. He said thousands of wells had already been shut down and that others would follow. He said the trend now was to operate the wells until the drilling equipment needed repairs, then stop pumping.

Coming to an End

“The Oklahoma oil industry is literally coming to the end of its time,” he said. “Oklahoma oil is older in vintage. Any state that produces oil from older fields is going to be more severely hurt than other states.”

Holmes also said there will be no incentive to drill new wells if the price of crude remains low.

“At these prices, no one is even going to bother,” he said.

Harry Culver of the state’s budget office, said all state agencies, except for education, were going to have to trim their expenditures by more than 15%. He said some proposals include cutting funds for the mentally retarded, clothing money for foster home children, aid to families with dependent children and the Medicade fund. One proposal, he said, is to eliminate the $30 a month in spending money given to residents of the state’s nursing homes. Culver said the money is provided to the elderly to buy such items as stamps and toothpaste.

“This is the thing that gives the elderly a little bit of independence,” said Culver. “It’s a reverse of the situation in the late ‘70s and early ‘80s, when Oklahoma was riding high and the rest of the country was hurting.”

Back in Stroud, the men sitting around Percy Bolen’s shop were saying that the only thing people discussed these days was oil and that the state government wasn’t doing enough to help. They talked about how the local TG&Y; store was closing and the Okie Steak House had gone out of business.

“It’s hurt all of them, from the machine shops to the grocery stores,” said Wunderlich. “It’s a heck of an impact to the whole state.”

“There’s a lot of people that ain’t gonna make it,” said Bolen.

Bankers Not Friendly

In the town of Cushing, up the road, the scene was much the same. Cushing, once a busy terminal for oil pipelines, is suffering like the rest of the state. Benny Teegarden, the owner of Venture Drilling Co., has had to cut his employees’ salaries and he had shut down two wells that week. Bankers are no longer the friendly people they were when the boom was on, he said.

“The financial institutions look down on you because you don’t have the collateral or clout that you had at one time,” he said. “They treat us now like we’re bootleggers.”

But Teegarden, like many other oilmen, said that sooner or later the price of oil would go back up and there would be another boom. It is the cyclical nature of the business, he said, and if you are an oilman, you take that for granted and just hope you can pull through the bad times.

“We’re tough,” he said. “We’re going to be here if they let us.”

Times researcher Joanne Harrison contributed to this story.