Oil Prosperity Delivers Economic Stimulus to TX

The oil boom in the North Dakota Bakken area has been getting a lot of attention lately due to the phenomenal increases in production there over the last few years, but there's also an oil boom going in Texas as well, thanks to the same advanced drilling technologies that are turbo-charging oil output in North Dakota.

The chart above shows daily oil production in Texas, which exceeded 1.8 million barrels per day in both April and May, reaching the highest level of production in more than 20 years going all the way to 1991.  Even though North Dakota oil production has increased six-fold over the last six years moving the state ahead of both California and Alaska in the last year to become the No. 2 oil-producing state, oil production there of 666,000 b.p.d. in June is only about one-third of the oil output in No. 1 Texas at 1.834 million b.p.d. in May.

Here's a recent account from the Houston Chronicle of the oil boom going on in West Texas in the Permian Basin, which is booming along with the Eagle Ford Shale area of South Texas, and has helped boost the state's oil production by 66% over the last two years (see chart above). 

MIDLAND, TX -- "As anyone who has tried to rent a house, navigate traffic or lease drilling equipment around here knows, the good times are rolling again. A strong demand for oil coupled with refined hydraulic fracturing and horizontal drilling techniques are tapping long untouchable, deep reserves.

What began a decade ago as a modest revival now is a full-fledged boom. The play extends across hundreds of miles of West Texas and into New Mexico, from Mentone east to El Dorado, and it is reviving long dormant backwaters. The best indicator, the Baker Hughes rig count, recently hit 442, after bottoming out in 1999 at 51. There are now more than 155,000 producing wells out here, generating revenue and requiring service for years to come.

"It's unbelievable. This has 50 years worth of life. They'll be redrilling the entire Permian Basin," exclaimed Jim Smitherman, chief executive officer of Security Bank in Midland.

Airport hangars in Midland now are jammed with private planes, there's a three- to four-month wait to join the Petroleum Club and many of the service companies lining Interstate 20 keep "Hiring" signs out front.  A freshly graduated petroleum engineer can make $80,000 a year, sometimes with a $10,000 to $20,000 signing bonus tacked on. Roughnecks and truck drivers willing to work killer hours can gross over $100,000 a year.

Arlen Edgar, 78, a longtime oil and gas investor said "There's a lot of money to be made. If you look at daily production in the Permian Basin, which is approximately a million barrels a day, that, along with the gas, represents $2.5 billion to $3 billion a month in production revenue."

Sales tax income for Midland went from $13.4 million in fiscal year 2001 to $29.4 million in fiscal year 2011. So much money is flowing in that the city's reserve fund is now equal to about half its general fund, double what it used to be. The wealth has triggered an ambitious capital improvements program. Midland will soon build a new firehouse while remodeling two others, and will also build a new municipal court building. Extensive new roadwork also is planned."

MP: Hydraulic fracturing and horizontal drilling is bringing new oil prosperity to Texas as well as North Dakota, and delivering an energy-based economic stimulus to both states, creating thousands of well-paying, shovel-ready jobs, bringing millions of dollars of new investment, and delivering millions of dollars in royalty payments to local landowners.

HT: Peter Parlapiano