Life After Oil
Ten years after the bust, Midland’s energy companies are still laying people off. So why is this town booming?
(Page 2 of 2)
He went back to school at UT—Permian Basin in Odessa and got a teaching certificate. His wife went to work for the federal government. In 1991 he closed his geology office, and, he said, “I’ve been in education ever since. I’ve gotten very caught up in the reeducation of Fred.” Today he makes $32,000 at the college.
“Some of my students are petroleum engineers who are retraining,” he said. “They’ll move in as professionals making a pretty good living at thirty to sixty thousand a year.” He stopped, and his eyebrows and forehead rose up to punctuate what was otherwise a tiny smile. “See how my standards have come down?”
Tony Best is the opposite side of the coin from Fred Wetendorf—the oil company executive who stayed with his company. But his work has changed almost as much as Wetendorf’s, and he is just as emblematic of what has become of Midland’s oil industry in the decade after $10 oil.
Best is the president of ARCO Permian, a unit of Atlantic-Richfield that didn’t even exist three years ago but has the oil patch buzzing. ARCO used to be like the other major oil companies in the Permian Basin, content to sell off its less productive fields, keep on pumping the productive ones, and just rake in the money. The majors seldom participated in the dealmaking—buying old wells and the geological information to drill new ones—that is the standard way of doing business for most independent oil operators. Deals have a short shelf life; the good ones get snapped up quickly, and multinational companies can’t make decisions fast enough to compete. (In ARCO’s case, all decisions for the Permian Basin had to be approved in Dallas.) The attitude of the majors was that the future of oil, to say nothing of the glamour, was overseas or in Alaska, where Best had been the field manager at Prudhoe Bay—not in the tired old Permian Basin, which has been producing oil since 1921.
But in 1993 Atlantic-Richfield changed its approach. It set up ARCO Permian as a separate company headquartered in Midland, brought in Best as the president, and phased out the entire Dallas bureaucracy and its 1,100 jobs. Today ARCO Permian is almost totally decentralized. It gets its budget from the parent company, but the decisions about how to spend it are made in Midland. The new division is designed to operate like an independent, and it has performed so well—netting in excess of $100 million in each of its first two years—that Amoco and Shell are in the process of forming a partnership to follow ARCO Permian’s lead.
“Independents never liked doing deals with majors,” Best told me. “They think of majors as big, slow, inflexible bureaucracies. Now we have the best of both worlds. We have the financial resources of a major oil company, but we think like independents. We’re aggressive and we’re fast. We can give a yes or no on a deal in three to five days.
“The independents are coming to us. I was at a Christmas party at Midland Center, and a man walked up to me while I was waiting in the bar line and said, ‘I’ve got ten million to invest before the end of the year. Do you have anything?’”
Best doesn’t have the weathered look that is typical of many independent oilmen, but neither does he fit the haughty CEO stereotype. At 46, he has the breezy enthusiasm of a real estate developer, especially when he is talking about the future of oil in Midland.
“The Permian Basin has produced thirty-seven to thirty-eight billion barrels of oil and gas equivalent in seventy-five years,” he said. “It’s still producing two million barrels a day. That’s thirteen percent of U.S. production. There’s eight and a half billion barrels of proven reserves left, and another ten to twenty billion in potential reserves. That means there’s at least another Prudhoe Bay right here.
“The trick is to get it out of the ground. We won’t be doing much wildcatting. Most of our drilling will be inside existing fields, or trying to extend them, using new technology. The future is exploitation, not exploration.”
But the change in ARCO’s structure and personality has not been achieved without cost. Three years ago ARCO employed 500 people in Midland. Today it employs 130. The entire drilling department is gone; the work that once paid the salaries of more than thirty people has been contracted to an outside firm. A lot of other jobs formerly performed by ARCO employees—maintenance, for instance—likewise have been, as the jargon of the day puts it, “outsourced.” ARCO still has to pay for the work, of course, but it doesn’t have to pay social security, unemployment, health benefits, or pensions.
The same story has been repeated all across town—though not necessarily to the same extent—as other companies have downsized. The layoffs have been cushioned, at least for professionals, by the fact that the big oil companies have always had good pension and stock-acquisition plans. Some longtime employees could leave with retirement packages of $500,000 to $1 million, including generous severance pay. Other laid-off workers have stayed in the oil business as consultants, to be hired back by the very companies that let them go—doing the same work for half the pay and none of the benefits.
So why is Midland booming at a time of layoffs in its biggest industry? The answer lies in a statistical quirk. In 1992 Midland and Odessa stopped their feuding long enough to persuade the U.S. Census Bureau that the two cities, though twenty miles apart, are really one metropolitan area (never mind that Odessa, the blue-collar oil-field service and refining town, deeply resents Midland, the white-collar entrepreneurial and corporate town). The combination makes Midessa, or if you prefer, Odland, the largest metropolitan area between Dallas-Fort Worth and El Paso and puts it on the economic radar screen of the nationwide stores. But Midland has been the big winner, scooping up the most sought-after stores because of its higher per capita income. Odessa traditionally had higher annual retail sales than Midland, but the influx of new stores has boosted Midland into a lead it will not soon relinquish. While Midland gets more and more big stores—a million square feet in the past two years—Odessa looks forward to the arrival of its first Chili’s.
The retail expansion, however, doesn’t explain all those new houses in the desert; the commercial growth is a middle-class boom. Some of the big homes are being bought by doctors prospering from an increase in hospital beds and independent oil operators prospering from oil wells bought from the majors, but some are being bought by families who are moving up only because they have two wage earners.
Midland is a different city today than it was during the bottom of the oil bust, and it is likely to change again in the coming years. Public school enrollment, following the pattern of modern American cities, is now 35 percent Hispanic and 10 percent black. Not too many years in the future, Midland will be a majority minority school district. The oil industry, which provided one job in every six in 1990, now provides one in every nine. That fraction will continue to decline as other layoffs occur. Like the rest of America, Midland faces an uncertain economic future. But ten years after $10 oil, uncertain is better than none.
Pages: 1 2
My Library
