OKLAHOMA CITY — Oklahoma’s oil and gas economy is slowing as the price of oil continues to seesaw and companies shutter rigs, industry advocates said Monday.
In December, Oklahoma had 141 rigs. The state ended last week at 100, said Chad Warmington, president of the Petroleum Alliance of Oklahoma. He said he expects that number will continue to drop.
“For Oklahoma, that means significantly fewer jobs and tax income,” he said. “The decline in revenue is coming; you’re just not seeing it yet.”
He said interest in developing petroleum in Oklahoma has dropped pretty significantly.
The state is competing against better oil and gas fields in other states, rig efficiency has increased and the Legislature has raised taxes on drillers by as much as $700 million, Warmington said.
“Comparatively, I always like to say our producers vote where they move their rigs, and they have voted by moving their rigs to other states,” he said.
Smaller companies seem to be weathering the slowdown better than larger ones, which have laid off “a considerable” number of people in the past year, said Dewey Bartlett Jr., chairman of the Oklahoma Energy Producers Alliance and president and owner of Keener Oil based in Tulsa.
Rig count is directly related to the price of crude oil and natural gas, he said.
Per-barrel oil prices in the past year have dropped into the low $40s and peaked in the mid-$60s and now are hovering around the mid-$50s, Barlett said.
With so much price volatility, companies are struggling to determine the future price of oil. In addition, horizontal wells are very expensive to drill and operate, he said.
Large companies tend to operate the horizontal wells while smaller operates rely on vertical, which can be more shallow, last longer and are cheaper to drill, Bartlett said.
But he doesn’t believe Oklahoma’s Legislature has done anything to discourage drilling.
“Generally speaking, the Legislature could make a difference in regulatory activity or in taxes,” he said. “And in both cases, the regulations, in my opinion, are fair and they’re not overly punishing. The tax rates, I think, are very fair.”
Consumers planning to travel this July 4 holiday, meanwhile, can expect to see lower prices at the pump, said Leslie Gamble, a spokeswoman for AAA Oklahoma.
Driven by a strong economy and relatively low gas prices, a record 41 million people are expected to hit the road this holiday week, she said.
Oklahoma has the ninth least expensive gas in the nation at $2.43 a gallon. That’s up 8 cents from last week but down 17 cents from the same time last year, she said.
“We are seeing (the price) slightly increase this week and across the nation,” she said. “Obviously, a lot of people are traveling, so it’s peak demand time.”
Janelle Stecklein covers the Oklahoma Statehouse for CNHI’s newspapers and websites. Reach her at firstname.lastname@example.org.