American Oil and Gas Reporter - September 2020 - 85

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ConventionSection: Permian Basin Petroleum Association

Advantages Keep Permian
First In Industry's Line
By Del Torkelson
MIDLAND-Although 2020 has by
no means left them unscathed, plenty of
indicators suggest oil and natural gas
companies in West Texas and Southeast
New Mexico are faring better than their
brethren in many other parts of the hydrocarbon-producing world. After all, the
Baker Hughes rig count data shows, more
than half the country's operating rigs are
in the Permian Basin.
Permian Basin Petroleum Association
Chairman Kyle McGraw, president of
Trinidad Energy in Midland, attributes
some of that to financial realities. "Our
basin still is one of the country's most
economic," he observes. "Our horizontal
shale plays have lower finding and development costs than many others and
our well results are a little better. Yes, we
have had a downturn, but our city streets
are not empty."
Although drilling, completion and
workover activity falls short of recent
years' standard, he notes that if given the
choice, many other producing areas would
trade to have as much going on as the
Permian has in summer 2020. "There are
service contractors fortunate enough to
have relationships with the active players,
and so they still are getting some work,"
McGraw relates.
A Temporary Situation
Permian oil and gas activity was so
intense for so long that some cooling off
was inevitable, McGraw says. "The traffic
has lightened a little, but Midland hardly
feels like a ghost town," he observes. "It
was such a frenzied boom for so long."
And even good times are not without
trade-offs, McGraw observes, citing the
example of how hard it became to consistently enjoy satisfactory dining experiences in many crowded Permian Basin
restaurants as oil and gas jobs pulled
many capable, hardworking people away
from other occupations. "It affected Midland's quality of life, but it was easy to
sympathize with the business owners, because they were hiring the best they
could," he recalls. "Recently, I asked the

manager at a new restaurant if hiring had
been easier. He said there were more applicants than he would have had six
months ago."
McGraw mentions a few ways in
which summer 2020 looks different. Until
recently, crews of transient oil field
workers flying into or out of Midland International Air and Space Port were a
common sight. "There would be several
guys traveling together wearing square,
steel-toed boots with hardhats strapped
to their backpacks," he describes. "Now,
you do not see them and, whether it is
because of the economic downturn or
COVID-19, airport traffic has slowed,
with fewer flights than there used to be.
Southwest, American and United still are
in and out in the morning and afternoon,
but not as often."
The reduction in flights also points to
the upcoming recovery, he suggests. Having worked in oil and gas for more than
four decades, McGraw notes he is enduring
his fifth downturn, and the path out of
this one seems much easier to identify.
"This one is different. It has been induced by a global pandemic and the associated economic shutdown," he says.
"We know this will pass as the economy
recovers and people get back to driving
and flying more. This was not because of
a technological change that hurt the value
of our production. People simply quit
consuming at the levels they were, but
that will not last forever. The question
for each individual company is if it has
the financial endurance to survive to the
other side."
Tough Timing
McGraw indicates his determination
to get Trinidad Energy to the other side
of this slump comes in part from his
faith in American oil and gas. So confident
is he in an inevitable comeback, that McGraw betrays not a hint of buyer's remorse
over what he concedes to be an exquisitely
ill-timed acquisition. Earlier this year,
Trinidad's production unit acquired from
Apache Corp. a field north of Post, Tx.,
on the Permian's northeastern edge.
"I am a brilliant investor," he chuckles.

"I closed on Feb. 28 at $55 a barrel. The
ink was not yet dry on the documents before we were looking at $25/bbl. Had the
oil price fallen in the middle of the deal,
I would have been stuck with a contract
to buy without being able to complete
my financing."
And now that the company is operating
those wells, McGraw says Trinidad has
set about a slow and steady renovation.
"We have been bringing wells back and
fixing things," he relates. "Even with
everyone hunkered down from COVID,
we are doing some work, but I don't
think that's unique."
He goes on to applaud his lender,
and others like it, for keeping a level
head throughout a tumultuous year.
"Banks are being very understanding,"
he says. "Our bank has been terrific,
because it realizes its customers are
dealing with a situation that was not a
product of bad management, but attributable to a sudden, unforeseen drop in
hydrocarbon consumption."
Meanwhile he contrasts, income from
Trinidad's commercial disposal well has
proven more stable. "That revenue does
not swing as much, but the rig count
affects some of our would-be customers,
so it still affects us," McGraw relates.
Concerns And Hopes
Although safety concerns associated
with the pandemic have lessened opportunities for oil and gas people to discuss
their challenges, McGraw acknowledges,
a congressional candidate's August event
provided some insights. Hosted by Republican nominee August Pflueger, who
is seeking to replace the retiring Mike
Conaway, R-Tx., the event provided a
snapshot of the issues on many PBPA
members' minds, McGraw recounts.
As voters from different corners of
the Permian Basin shared their concerns,
McGraw continues, the industrywide situation came across as severe but not
hopeless. "Many in the service industry
are doing whatever they can to hang on,"
he describes. "Folks in the pressure pumping and fracturing business are putting
unsustainable stress on their equipment.
SEPTEMBER 2020 85



American Oil and Gas Reporter - September 2020

Table of Contents for the Digital Edition of American Oil and Gas Reporter - September 2020

Contents
American Oil and Gas Reporter - September 2020 - Intro
American Oil and Gas Reporter - September 2020 - 1
American Oil and Gas Reporter - September 2020 - 2
American Oil and Gas Reporter - September 2020 - 3
American Oil and Gas Reporter - September 2020 - 4
American Oil and Gas Reporter - September 2020 - Contents
American Oil and Gas Reporter - September 2020 - 6
American Oil and Gas Reporter - September 2020 - 7
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