Longview News-Journal, Oct. 3, 2009: CARTHAGE—Dozens of drilling rigs, trucks and extraction tools sit idle in what some locals call the “gas graveyard” along a northeast section of Loop 436, leaving officials worried about one of the leading industries in East Texas.

“I’ve never seen it this bad,” City Manager Brenda Samford said. “This time last year, many of those same yards were empty because companies were drilling everywhere. It would make my job easier if those times were to return.”

That return might be soon.

Oil and gas economists project gas prices will rebound from record lows by early 2010, which could eventually spawn another drilling boom across the region.

Market signs

Foreign demand and the need for heating oil in the New England states this winter might drive some oil and gas workers back into the field, said Ken Morgan, Texas Christian University geology professor and director of the TCU Energy Institute.

“Going into 2010 we expect to see things heat up,” Morgan said. “But right now there are some indicators we are seeing in the market that are suppressing natural gas prices and making it difficult for companies to start new drilling projects.”

Natural gas, trading for more than $10 per thousand cubic feet between June and July 2008, is selling in the range of $4.64 per thousand cubic feet and was as low as $3.60 in recent weeks, according to the Baker Hughes report. Baker Hughes is an oil and gas company that monitors drilling operations worldwide. A barrel of crude oil was trading in the $69 range Friday, compared with prices that topped $130 a barrel during summer 2008.

Prices might not be the most attractive for investors, but consumers are getting at least a temporary break at the pumps.

“The low gas prices are a direct result of the market price for natural gas and steady oil prices,” Morgan said. “However, once drilling picks up, people should be prepared to see prices at the pump increase.”

Morgan said oil is trading at relatively better prices than natural gas since there is not an abundance of the product in storage, but that could change.

“This is such a volatile market, and depending on demand, could drastically increase tomorrow. However, the facts are right now we have over 4 trillion cubic feet of natural gas in our reserves. That’s a lot of natural gas and is a reason why we’ve seen gas prices and drilling operations decrease,” Morgan said. “Right now oil prices are good, while $100 and above would be better, current oil prices are good for that sector of the business.”

Morgan added that the global recession, along with finding capital from investors and banks, is taking its toll on plans for new area drilling operations.

“It costs millions of dollars to extract natural gas from the earth, which at times can be more than 10,000 feet below the surface,” Morgan said. “With the current recession, it’s becoming harder to get a return from the gas drilling operations since natural gas prices are so low. However, it’s not impossible.”

Holding steady

Despite steady oil prices and low natural gas prices, some area drilling companies have announced plans to expand or retain their operation’s staffing levels in the region.

Longview’s EnCana Oil and Gas — a company that specializes in oil exploration and extraction throughout East Texas — said it plans to keep its staffing levels .

“There are a couple of openings we’re looking to fill,” said Al Sommers, community relations spokesman for EnCana. “But for the most part, the company does not have plans to add any additional jobs in the East Texas area at this time.”

Halliburton officials in September announced they would bring 120 new jobs to Kilgore by 2011.

Halliburton has been in the city since the early 1940s and employs about 700 people, according to Kilgore Economic Development Corp. Director Amanda Nobles.

The $12 million expansion includes paving the entire site of the facility and building a new truck maintenance shop, said Diana Gabriel, Halliburton’s senior manager of public relations.

“Halliburton has served as a local employer, not only during times of industry growth, but in down cycles as well,” Gabriel said. “Although 2009 has been a challenging year for the industry, the long-term outlook is positive, and Halliburton is working to ensure that we will be able to accelerate our growth when the recovery occurs. This investment in our infrastructure is a demonstration of our belief in that goal.”