With the price of oil wallowing beneath $30 per barrel for almost a month, some of the lowest prices in the last decade, the industry in New Mexico suffered from capital reductions and threats of layoffs.
The State announced the global spread of coronavirus and subsequent respiratory illness COVID-19 reached New Mexico in recent weeks, with more than 200 case reported in the state as of this week.
As the virus spread across the globe, the pandemic along with a price war between Saudi Arabia and Russia decimated demand for commodities such as fuel, and local and state agencies were forced to look for ways to support the economy amid the pandemic in a state economically reliant on extraction.
As of Monday, domestic crude oil was trading at about $20 per barrel.
This low price could impact local communities throughout the Permian Basin, as major producers reduce expenses and operations in the region.
One of those majors, Occidental Petroleum announced a multi-billion-dollar reduction in its 2020 capital spending from up to $5.4 billion to as low as $2.7 billion, while reducing its production by 6 percent, down from up to 1.3 million barrels of oil equivalent per day (BOEPD) to as low as 1.2 million BOEPD, per a Wednesday news release.
Occidental’s operating costs were also expected to be cut by at least $600 million, including salary cuts for executives at the company.
“We are making solid progress with additional cost reductions to help withstand the low commodity price environment and other macroeconomic pressures impacting our industry and the global economy,” said President and Chief Executive Officer Vicki Hollub.
“Based on our team’s recent efforts, we now expect to significantly lower our costs in all aspects of the business. We will continue to take actions as necessary to further strengthen our balance sheet and ensure the long-term viability of our business.”
The latest data from Baker Hughes showed New Mexico lost three rigs between March 20 and 27 from 112 to 109, as the virus spread throughout the state.
That dropped New Mexico below the month’s average rig count of 114, and last month’s average of 114 rigs.
With the vast majority of the state’s oil and gas activity centered in the Permian Basin in the southeast region of New Mexico, including Eddy and Lea counties, U.S. Rep. Xochitl Torres Small (D-NM) called on the federal government to provide relief to the southeast which could be the most susceptible region of her home state to the impacts of the price drop.
She hoped to ensure additional relief legislation to address the “unique” challenges facing the energy industry in the Permian, read a news release.
A bipartisan letter signed by Torres Small and eight other U.S. Representatives called on Congressional leaders in the House and Senate to include the industry in any further relief, as oil and gas was estimated to provide 10.3 million jobs, and 5.6 percent of total U.S. employment.
“We know from previous economic aid efforts that any COVID-19 relief package must protect all hard-working Americans. The effects of COVID-19 will be felt across the economy. But they will be particularly acute in the energy sector,” the letter read.
“The dramatic reduction in production coupled with the COVID-19 pandemic leaves these hard-working men and women with an unprecedented challenge.”
The lawmakers worried oil and gas workers laid off during the industry’s decline would be unable to seek new jobs due to state and local health restrictions in response to the pandemic related to travel and in-person gatherings.
“Unable to search for new employment because of federal, state, and local restrictions in response to the COVID-19 pandemic, they will face additional challenges in seeking new employment that makes this downturn unlike any we have experienced before,” the letter read.
“As various sector-specific proposals are considered to address the impacts of COVID-19, this sector and the people who work in it must be taken into account. We stand ready to work with you on behalf of the women and men who work throughout the industry for the benefit of all Americans.”
Stacy Johnston, spokesperson for the New Mexico Department of Workforce Solutions said it was unknown what the extent of the economic damage would be, as the virus continued to spread, and it was unclear when prices would recovery.
“We simply do not know what the impact will be as we don’t know how long prices will remain this low. What we know is that the shorter the situation lasts the sooner we can get back to business as usual,” she said.
“Therefore, we encourage everyone to practice social distancing and wash their hands. The more we can flatten the curve on COVID 19 the better it will be for us all.”
Johnston said the Department was available for assistance to New Mexicans who lost their jobs.
Local agencies such as the Carlsbad Department of Development hoped to increase revenue to businesses through promotion and informing consumers, said Executive Director John Waters.
He said he was confident Eddy County would survive the outbreak.
“Right now, we as a department are focusing on helping out our area businesses that are hurting from this current COVID 19 situation. We are continuing to pass on important information on recovery and relief programs as they are announced by private and public entities,” Waters said.
“Whatever the impact will be from this strange period that we are all living through, the people of Eddy County are hard-working and tenacious, and I have no doubt that our community will all pull through this and recover stronger than we were before.”
Adrian Hedden can be reached at 575-628-5516, email@example.com or @AdrianHedden on Twitter.
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