While oilpatch ‘majors’ drown in debt, service companies are eking by

  • Energy Service Companies

While the “majors” in oil and gas production/exploration and the service industry are awash in debt, smaller oil field servicing companies in Oklahoma remain in business but at a lower level of activity and leaner profit margins.

One of those is Al’s Pump & Supply Co. approximately nine miles northeast of Walters, just off SH-65. The three employees at Al’s sell supplies such as valves and connections to oil and gas producers and rebuild their pumps.

“Things are kind of slow right now because oil is so cheap,” said Al Smith, who has owned Al’s Pump & Supply since 1998. “You’d think they would back off, but a lot of them keep drilling and keep producing oil.” Exploration and production by the majors “keeps us in business, to some extent,” Smith said.

“Our work is still fairly steady,” said Danny Morgan, president of Morgan Well Service, which was founded in 1963 and has operations in Prague and Chickasha. They rehab wells, “fish” broken rods out of wells, clean sand out of pumps employed in fracking operations, switch new oil field pumps for worn out old ones, etc.

“We have had to roll some of our rates back,” Morgan conceded. “For example, we used to charge both ways for our travel time, but now we charge for just one way and eat the cost for the return trip.”

Also, “We’ve downsized a bit,” he said. The company has “about 20 to 22” employees, he said, down from 30 in 2017. “We’ve kept a core of experience around us.”

Morgan said he hasn’t had to adjust his wage base. “We’re trying to hold off on that,” he said, “because we’re only as good as our employees.”

He had four rigs operating in the field on Feb. 3 and several others in reserve.

Business continues at a steady pace, Morgan said. “We have a long-term customer base.”

The Association of Energy Service Companies (AESC) counted 1,108 active oil patch service rigs throughout the nation in December 2019. That number was 187 fewer than the 1,295 service rigs that were active in December 2018, AESC ledgers reflect.

In the Mid-Continent region, 75 active rigs were operating in December 2019, compared to 128 in December 2018, a decline of 53 rigs, AESC records show.