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Gillette feels the crunch as oil prices dive

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Rocky Benson gets a little choked up when talking about Gillette. It’s a far cry from his hometown of San Diego, California, but to Benson, Gillette and Wyoming have come to mean everything.

A troubled past included getting involved with the wrong crowd and prison for Benson. He needed an opportunity to get his life on the right track, and after earning his GED in prison and without a college education, he chose the oil field.

That choice brought him to Gillette.

Benson began earning a healthy living wage and stuck with the job instead of turning back to his former ways. If the money wasn’t so good working the local oil fields, Benson said he would have regressed.

That’s why he gets emotional in saying the oil field saved his life.

And for that, Gillette will always be special to him.

But 2020 hasn’t exactly been more good times for Benson and many other oil field workers now out of work. When he made good money in the past, he spent it. Now he’s broke.

Once the breadwinner of the relationship he shares with fiancée Kayla Lusch, the past couple of months have been hard.

Oil prices have dropped to historic lows, even so far as to be in the negative at one point this past week, and along with the ongoing COVID-19 pandemic that’s shut down much of the world, it’s done the same for consumption of oil and petroleum products.

For many Campbell County oil field workers and support industries, that’s meant layoffs.

Benson remains optimistic and laughs when he proclaims his new job as a “housewife” while Lusch works two jobs as an essential worker to keep money coming in. Even her shifts have started to become more unpredictable in recent weeks.

“We all knew it was coming,” Benson said of the oil field layoffs.

So did Benson’s longtime friend Jared Erickson, who was laid off more recently from his job as a tool hand for oil and gas rigs.

“It was coming, but ride it out,” Erickson said was his motto before his layoff. “I wanted to stick with it as long as I could.”

The former tool runner was fortunate to line up a new job within a week of losing his last.

“I didn’t want to go on unemployment, I just wanted to get back to work and stay busy,” he said.

Luckily, Precision Well Service was hiring.

“I just got a phone call telling me this place is hiring,” Erickson recounted. “I dropped everything, ran down there and was hired the next day.”

Benson hasn’t been as fortunate. This layoff wasn’t his first, he admitted, so the signals of another rough patch ahead became obvious as oil prices continued to fall. Once work shifts turned sporadic, uncertainty set in. Benson saw rig after rig stacked out. Soon, it was he and his co-workers who were sent packing.

“Pretty much since the beginning of the year it’s been going down,” Benson said of the local oil fields.

‘We may even come

out stronger’

At M & K Oil, a Gillette-based company that operates about 700 wells around the region, the bust is hitting as hard as other companies, said Nate McLeland, managing member of his family’s company and a member of the Gillette City Council.

“When oil started doing what it did Monday, we just stopped all of our sales for now,” he said about a plunge that saw West Texas Intermediate oil prices fall as low as -$40 a barrel. Bent crude also bottomed out, and hasn’t rebounded much, hovering in the low $20s most of last week.

At those prices, oil producers in Campbell County can’t afford to continue, McLeland said.

“For the moment, we’ll probably not even try to sell anything,” he said. “We’ll just fill the tanks up and, if we have to, shut (the wells) in.”

He said M & K still has about 45 people working, but that’s a far cry from running full-bore. While he didn’t have a number of layoffs he’s had to make so far, McLeland said it’s been “quite a bit. It’s been really difficult and it’s been hard for those families.”

As a generational oil producer, McLeland has been in and around the industry throughout his lifetime and has seen many booms and busts.

“There’s never been anything like this,” he said. “Prices dropping that much that fast, that’s unprecedented.”

While he’s confident oil will cycle up again, there’s no telling how or when that could happen.

“You assume it will recover to some extent, but what that recovery looks like and how deep that depression in oil prices is going to be, it’s really hard to know,” McLeland said.

He also expressed confidence in Gillette weathering another economic storm.

“I think this community and this state are resilient,” he said. “We can figure this out and we’ll get through it. Things may be different (then), but I’ve always been shocked by the resilience and determination of our community and we have those things in our favor. We may even come out stronger.”

Impact of layoffs is broad

Across town on East Seventh Street on the final day of March, Troy Mapp, a worker for Aaron’s rent-to-own in Gillette, hauls a queen-sized mattress by himself out of an abandoned mobile home. He takes it down the front steps of the front porch and loads it onto his truck parked along the curb.

Inside, landlord Michael Chambers peers around a trailer that’s still fully furnished with stocked cabinets, closets and furniture. The scene around him seems more as if someone was still living there and had just stepped out to run a quick errand.

In reality, the man and woman who lived there had skipped town knowing they couldn’t make rent due the next day. When Mapp was taking back the couple’s furniture, they were well on their way back to their hometown in Michigan, Chambers said.

His tenant was one of hundreds of local oil field workers out of work, and combined with layoffs, furloughs and pay reductions caused by the coronavirus shutdown, there seemed to be no prospects on the horizon.

“I don’t know what happened to him,” Chambers said as he emptied still-full cupboards and the refrigerator. “They moved out ... couldn’t pay their rent.”

The man who had been living there was previously employed at Independent Oil & Gas, Chambers said. It isn’t uncommon for the landlord who manages a handful of units in the area to rent to oil and gas workers. Looking out the window, he pointed to other rentals surrounding the trailer also housing oil workers. He understands their livelihoods; he was once a roughneck many years ago.

“I try and stay rented and do my own maintenance,” Chambers said about his property. He keeps rent affordable, which helps with avoiding lengthy times of vacancy. He’s been managing properties since 1999.

“We’ve had our ups and downs, but everyone does,” Chambers said of the boom and bust cycle of fossil fuel production, noting outsiders who come to Gillette sometimes have a hard time getting used to a city with little nightlife. Without the work that brought them here, some flee Campbell County as quickly as they arrived.

Despite the recent layoffs in the oil field, Chambers said he has been able to keep his five units rented.

At Mountain View Apartments, manager Kim McCuin is seeing a similar response. So far, one resident who was working on the construction side of oil and gas has contacted her about his hours being cut.

For the complex she manages, more coal workers have contacted her than anyone else who have been affected by layoffs. Including 300 coal layoffs announced Thursday, there have been at least 420 layoffs at Powder River Basin coal mines in the last two months.

Luckily, the workers in her apartments are near the end of their leases, which they will finish out before moving on, McCuin said.

In comparison to 2016 when coal and oil in Wyoming both crashed, the impact of the recent oil bust and COVID-19 has so far been to a lesser degree, she said, at least for now.

“Our occupancy now is higher than it was back in 2016,” McCuin said.

Lots of oil, no demand

With Russia and Saudi Arabia at war to produce more oil than the other, an unforeseen pandemic caused by the coronavirus was tossed into the mix to create a perfect storm for the global oil industry. An attempt to flatten the virus curve has caused businesses to shut their doors and massive restrictions brought modern life for many around in the U.S. and around the world to a slow crawl.

As the nation sits stagnant, so does the demand for oil.

“We peaked in January and it’s been slowly going downhill,” said Wyoming Oil and Gas Conservation Commission Supervisor Mark Watson. “There was basically two months supply and not enough demand. It just got worse and worse around the world.”

Brent crude was at $21.80 a barrel Saturday, a far cry from the $74.35 it closed at a year earlier on April 25, 2019. Even as late a two months ago, oil was still selling at close to $60 a barrel. With such a sudden and dramatic plunge, it now costs more to produce oil in Campbell County than it can be sold for.

The price of oil fluctuating is nothing new, but Watson said this is the first time he’s seen a “double-whammy” of impacts on his industry with overproduction and sudden drop in demand.

“To me, that’s historic, at least in my lifetime,” he said.

According to data compiled by the Wyoming Oil and Gas Commission, barrels of oil produced in Campbell County early this year were 1,807,847 million in January, up from a year ago when 1,587,435 barrels were produced in the same month. February figures saw 1,510,653 barrels produced, a rise from 1,445,822 barrels over 2019.

Oil prices peaked at the beginning of the year at $51.61 a barrel, before slipping to $44.67 the next month. March saw the price of a barrel to plummet to $20.48.

Wyoming also has sunk to having only six working oil and gas rigs within the state as of last week, a far cry from the 34 working rigs a year ago. Campbell County has two of those working rigs. Nationwide, rigs for oil and natural gas dropped by 73 this past week to 529.

Precision Well Services President Danny Lass said he is feeling the impacts of the decline.

“It’s really bad,” Lass said. “About the end of January, the oil prices took a dive. They were doing pretty well until then.”

With oil’s deep roots in a boom-and-bust cycle, Lass has become accustomed to the ups and downs of the industry and the uncertainty that comes along with it.

“We’ve been through it before,” he said. “Hopefully, we get through this one.”

Worse than 2016

Benson’s arrival in the oil field gave him hope for a brighter future. All he had to do was put in the work, and the rest would sort itself out, he thought.

Some months Benson said he was doing quite well, pulling in more money than he ever dreamed was possible. Every few months, his checks got larger and larger. Other times, his income fluctuated wildly or he was between jobs. Now, he’s not so sure how things will pan out.

Shutting down rigs means laying off the workers manning those rigs.

David Bullard, senior economist with the Wyoming Department of Workforce Services, said the mining, quarrying and oil and gas extraction sector of Wyoming’s workforce has been hit particularly hard.

Unemployment claims reported last week showed 466 initial claims, a spike from just 34 the same week a year ago. Additionally, 317 employers have workers filing claims and 1,024 workers have continued their unemployment claims. From March 14-21, initial claims climbed from 70 to 187 and show no signs of letting up.

“With oil prices coming down dramatically, we see a large increase in claims in oil and gas suggesting there have been a lot of layoffs in that industry,” Bullard said.

The scope of what is taking place in Campbell County overshadows the most recent blow the energy sector experienced in 2015-16 when 465 PRB coal workers from the world’s two most productive coal mines — Peabody Energy’s North Antelope Rochelle and Arch Coal’s Black Thunder mines — were laid off.

Bullard said the claims in the minerals extraction sector are much higher in 2020 than they were in 2016. A total of 1,489 initial claims in weeks 12-15 of 2020 in mining, quarrying and oil and gas extraction are higher than 2016 claims, when a total of 838 claims were made in the same period.

“In short, current claims in mining are much higher than in 2016,” Bullard said.

Hard times caused the Wyoming Oil and Gas Conservation Commission to protect producers by approving a historic vote to reduce the amount of conservation taxes assessed on oil and gas.

The commission said the vote was necessary to “address the economic conditions oil and gas companies are presently facing,” Watson said. “Reducing the conservation tax and providing some reprieve are necessary steps that the Wyoming Oil and Gas Commissioners have approved to help in this difficult business environment.”

When will oil rebound?

Watson said there are too many factors now to predict a rebound for oil in Wyoming, but that it likely won’t be anytime this year.

“There’s just too much supply in the world,” he said. “Now they’re having a problem with storing it all.”

For the situation to improve, storage will need to become available and the economy must rebound, he said.

“Hopefully in 2021, things will be better,” Watson said.

But Benson, like many of his peers, can’t wait until the new calendar year rolls around to get back to work.

He now thinks of moving back to his hometown of San Diego, but would like to continue earning high wages in the oil field.

If things don’t improve quickly here, he has his sights set on Williston, North Dakota — right in the middle of the Bakkan oil patch. He spoke of earning higher wages there, along with benefits including per diem and travel allowances to cover his frequent flights back to California during time off every few weeks.

By August, Benson said it’s likely he will have to break away from the city and people he credits with saving his life. It is not a move he takes lightly.

He loves Gillette, which he has called home since 2014, although he’s not a fan of the winter cold and wind. He shares a common hope with his peers for the local economy and industry to sort themselves out sooner than later.

Managing Editor Greg Johnson contributed to this story.

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