A variety of factors are contributing to the county’s increased oil production, including the ongoing controversy involving the Strait of Hormuz in the Middle East.
Steve McClain, president of Sterling Drilling Company and Sterling Oilfield Services, Inc., headquartered in Pratt, said Wednesday that the county’s oil production is on an upswing with a variety of factors coming into play.
“This is the first year we are seeing increasing oil prices and it is giving us better oilfield contracting conditions,” McClain said.
As president of a company that has been in the drilling business for 75 years, McClain offered insights into a situation brewing in the Middle East that could positively impact oil production in Pratt County and nationwide. He referred to a national news report this week that Iraq is threatening to cut off the Strait of Hormuz.
“Twenty percent of the world’s oil goes through this strait. The world uses 100 million barrels per day. So this is a big deal,” McClain said.
Referring to a possible cutoff of Mideast oil, Merrill Matthews, resident scholar with the Institute for Policy Innovation in Dallas, Texas, said the good news is that the United States has the resources and the ability to fill the gap, and rising crude oil prices could serve as the catalyst to do so.
Regarding the Middle East situation, McClain said Wednesday that, with President Trump recently getting the U.S. out of the Iran nuclear deal, around three to four million barrels of oil could be taken off the world market by year’s end. This equates to three to four percent of what the world uses each day, so other countries will need to fill this gap to stabilize prices.
Most generally, rig activity in local oilfields rises and falls with the oil prices, McClain said. “During the last quarter of 2014, the Kansas common oil price free fell from $85 to $40 and this put all Kansas operators with wells to drill on hold. Then it just got worse (actually really bad) and the oil price stayed low for three full years. This caused many problems with Kansas drillers and service companies.”
The result, McClain said, was a tremendous loss of jobs in the industry, and most service companies laid off workers to try to stay in business. Some longstanding businesses folded or had to sell out.
McClain said he feels that, for now, Pratt county oilfield service companies are holding their own and hiring just enough help to keep up with demand. But there is growth happening.
“Hopefully during 2019 these companies will be able to increase their contracting prices and start building their companies back up to pre-crash 2013-14 levels,” McClain said. “One of the busiest times for Sterling Drilling was from 2004 to 2008. These were the years of expansion and increasing contractor prices. I remember during this span we were running three rigs and had just put the fourth rig out. I had them all booked up for more than a year in advance. Our phone was really ringing with operators wanting to drill. Our office could hardly keep up. The oilfield was healthy.”
According to John H. Morrison, president of Oil & Gas Independent Service, Inc., headquartered in Wichita, oil field activity is much improved in the area over last year with the number of drilling permits up nearly 26 percent and number of active drilling rigs in the state up nearly 43 percent.
“Exploration still seems to be lagging somewhat in Kansas due to fluctuating, unstable oil prices and a slowdown of investor capital into drilling prospects,” he said.
A map from the Kansas Geological Survey of Pratt County Oil Production shows the most productive year in the state was 1995, when 625 Kansas wells produced a total of 585,871 barrels of crude oil. The low point of production for a full year was 2017 when 471 Kansas wells produced a total of 290,404 barrels of oil. The survey shows that from January through May of this year, 417 Kansas wells produced a total of 133,841 barrels of crude oil.