The Roundup -

Northern Oilfield Services Survives Slowdown

 


Oil prices have started to make gains after a turbulent year in the Williston Basin. Just two short years ago, the Bakken was booming with activity. North Dakota was steadily producing more than 1.1 million barrels of oil every day with an average rig count of around 200. In the “shallow end of the pool”, as some say, production hovered around 80,000 barrels of oil per day in Montana, with less than 20 drilling rigs at any given time.

Permit and rig counts have declined dramatically. In Montana, permits for new wells have been declining since a peak in 2012 when 392 total permits for oil wells were issued by the Board of Oil and Gas Conservation (BOGC). In the first quarter of 2012 alone, 125 permits were issued.

In the first quarter of last year, that number was reduced to only 16, with a total annual permit count of 45.

Since January of this year, only three permits have been approved.

North Dakota’s rig count has fallen from more than 200 to 26, and Montana has yet to see one active drilling rig this year. Without the new drilling activity, production has started to taper off, and so too have production tax revenues to the State and counties.

In Montana’s most prolific oil producing region, Richland County, current oil production (reported by the BOGC) sits just more than 3 million barrels of oil nearly halfway through the year, a mere fifth of last year’s annual oil production in the county.

As mergers and acquisitions, layoffs and bankruptcies reshape the once bustling communities of the Williston Basin, oilfield companies remain committed to surviving the downturn which nearly all see as only a temporary roadblock to future development.

With eyes fixed oil prices, the survivors of the slowdown, including operators and the service providers alike, lie in waiting for the first opportunity to ramp up drilling once again.

Northern Oilfield Services, Inc. (NOSI) in Plentywood is among the survivors. NOSI has operated in Montana for more than 24 years as an oilfield service provider, and has seen its share of ebb and flow.

For current owner, Bart Horner, however, this is the first “bust”.

Horner purchased NOSI in 2008. The company was booming as the result of gangbusters drilling in northeastern Montana and across the border in western North Dakota. The company maintained a constant stream of work hauling production tanks and building tank batteries for new wells.

Today, the company remains successful due to careful financial planning and a diverse service offering.

Jill Tommerup, Director-Finance and Strategic Management, has been with NOSI for almost a decade.

“We were well positioned when Bart bought the company, with more than two decades of experience and name recognition in the area,” said Tommerup. “We have only strengthened our ability to meet the changing demands of the oilfield by expanding our list of services and carefully monitoring the budget.”

Operating with minimal debt has served NOSI well through the slowdown in activity.

Horner says the company has seen periods of reduced hours for roustabout services, largely due to the lack of tank battery construction for new wells. Although NOSI has seen some turnover, the company was not forced into the kinds of layoffs other service providers experienced.

“When employees become accustomed to 70-80 hour work weeks, it can be tough to adjust to just 40 hours,” said Horner. “We’ve had to get creative in order to offer as many hours as we can until oil prices and activity pick back up again.”

Horner explains that lease maintenance has kept the roustabouts at NOSI working, providing weed spraying and removal, mowing services, and repairs of ancillary production equipment and facilities.

Lease operators have also remained gainfully employed. Oilfield service providers are especially at risk when companies acquire new ownership, as many larger producer/operators use in-house lease operators and roustabouts. Fortunately for NOSI, this hasn’t yet posed a threat to their continued business in the area. The company maintained its largest contract for lease operations with a client that gained new ownership last year.

In addition to contract pumping and roustabout services, NOSI offers heavy haul transportation, hot shot trucking, environmental remediation, dirt work, and downhole consulting.

The company has recently expanded their list of services to include mobile repairs and qualified crane inspections by Jim Salter, manager, Fleet Maintenance at NOSI. Salter boasts more than 35 years of experience as a truck and trailer mechanic. Prior to hiring on at NOSI two years ago, he was a foreman and service manager for various firms. Salter has serviced cranes and performed crane inspections for eight years as a field mechanic, and formerly owned a truck and trailer repair business for 10 years.

NOSI serves as just one example of the resiliency and innovation that’s kept people showing up to work in the American oilfield for a century and a half. And while today’s oil prices tell a somber story, the future of the oil and gas industry remains bright.

The world needs petroleum; it runs on it. And so long as the business, political, and regulatory environment afford black gold hunters the opportunity to risk capital on the next best resource play, the American dreamers of the oilfield will make it happen.

 

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