With the price of oil wallowing beneath $30 per barrel for almost a month, some of the lowest prices in the last decade, the industry in New Mexico suffered from capital reductions and threats of layoffs. The state announced the global spread of coronavirus and subsequent respiratory illness COVID-19 reached New Mexico in recent weeks, with more than 200 cases reported in the state as of this week.
As the virus spreads across the globe, the pandemic, along with a price war between Saudi Arabia and Russia, decimated demand for commodities such as fuel, and local and state agencies have been forced to look for ways to support the economy amid the pandemic in a state economically reliant on extraction.
This low price could impact local communities throughout the Permian Basin, as major producers reduce expenses and operations in the region.
Major Oil Producers
One of those majors, Occidental Petroleum announced a multi-billion-dollar reduction in its 2020 capital spending from up to $5.4 billion to as low as $2.7 billion, while reducing its production by 6 percent, down from up to 1.3 million barrels of oil equivalent per day (BOEPD) to as low as 1.2 million BOEPD, per a Wednesday news release.
Occidental’s operating costs were also expected to be cut by at least $600 million, including salary cuts for executives at the company.
“We are making solid progress with additional cost reductions to help withstand the low commodity price environment and other macroeconomic pressures impacting our industry and the global economy,” said President and Chief Executive Officer Vicki Hollub.
“Based on our team’s recent efforts, we now expect to significantly lower our costs in all aspects of the business. We will continue to take actions as necessary to further strengthen our balance sheet and ensure the long-term viability of our business.”
The latest data from Baker Hughes showed New Mexico lost three rigs between March 20 and 27 from 112 to 109 as the virus spread throughout the state.
That dropped New Mexico below the month’s average rig count of 114 and last month’s average of 114 rigs.
Looking for Help
With the vast majority of the state’s oil and gas activity centered in the Permian Basin in the southeast region of New Mexico, including Eddy and Lea counties, U.S. Rep. Xochitl Torres Small (D-NM) called on the federal government to provide relief to the southeast, which could be the most susceptible region of her home state to the impacts of the price drop.
A bipartisan letter signed by Torres Small and eight other U.S. Representatives called on Congressional leaders in the House and Senate to include the industry in any further relief, as oil and gas was estimated to provide 10.3 million jobs and 5.6 percent of total U.S. employment.