Lessons learned through boom and bust
FARMINGTON, N.M. (AP) — As the price of crude oil hovers around $30 a barrel with only two rigs currently running in the San Juan Basin, many local oil and gas companies have responded by laying off employees and struggling to pay down debt.
Some of the longer-running oil and gas business owners in town say that while no downturn is pretty, they have all posed similar challenges and familiar demands on anyone running any kind of company.
Three Farmington oil and gas company owners who have survived boom and bust cycles — once or several times — share what they've learned.
McGarrh is the president and owner of Basin Well Logging Wireline Services, Inc., an oilfield service company in Farmington, and has been in the oil and gas industry since he was a kid.
McGarrh said his dad was so popular — he often took payment in chickens or other non-cash items — his customers called him "Used Car McGarrh," a nickname that would follow him even after he started his oil and gas service company.
The business survives today, McGarrh said, because Basin Well doesn't take on any debt, reinvests profit in new equipment, provides quality service and complies with all safety regulations.
"In 1986, he had so much debt, that he had one truck tied up on a note, two other trucks tied up on a note, a line of credit that was maxed out and this property was financed," McGarrh said.
In 1959, he started his Dugan Production Corp., ironically, during a downturn caused by a glut of underpriced natural gas and the collapse of local building construction in San Juan County that would persist until the early 1970s.
Dugan has carried his company through about five such cycles of high and low by always looking after his employees and the leases he owns with equal care.
Looming federal regulations like the U.S. Bureau of Land Management's proposed venting and flaring rule are doubling the pain for an aging basin that has a significant number of marginal, or low-producing, wells that would be rendered unprofitable under the rules in their current form, he said.
"Oil prices dropped by $20 in three months, so that was really the start of the really tough times," he said.
In it, Dugan also said discovery of an elusive 'big oil pool' deeper underground could still be found and triggering a sixth boom period in the area.
Bill Clark
Since 1992, Clark was owned and operated A-Plus Well Service, Inc. on Bloomfield Highway, a service company that specializes in the plugging and abandonment of depleted oil and gas wells along with well-casing repair, cementing and perforating services.
Clark has worked in the oil and gas industry since 1977 and considers the current downturn "a very challenging time," which, for him, means he has had to lay off employees.
When crude oil prices were around $100 a barrel on the commodities market, Clark said his company rose to a high of 62 employees, but after oil began its precipitous fall in November 2014, he has had to face the books and do something that the large corporations down to the small independents in the San Juan Basin have had to do — cut payroll expenses and let people go.
Twelve of those have worked for Clark for close to 20 years each, he said, and he considers that a testament to the values at A-Plus — offer your customers quality service and treat your employees like family.
To help the transition, Clark hired former School of Energy Dean Randy Pacheco to ultimately fill his shoes and help convert the company using an employee stock ownership plan, or ESOP, which will provide all Clark's employees with a no-cost ownership interest in A-Plus.
A self-described fiscal conservative, Clark said he took on some debt, but he sees it as a necessity for his expansion plans and investing in the business.
Like so many in the industry faced with volatile crude oil prices, his company's goals are simple.