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Oil boomtowns in West Texas are going bust with oil

Houston Chronicle logo Houston Chronicle 5/1/2020 By Erin Douglas and Sergio Chapa, Staff writer

Published May 1, 2020

In Kermit, 50 miles west of Odessa and just south of New Mexico, life often feels like one big weekend in a casino, explains Rodney Hayes, an owner of a flower shop.

Thousands of workers flocked to Kermit and other West Texas towns that dot the Permian Basin, betting their money and lifestyles on an oil boom that stretched over much of the last decade. But even as Kermit boomed with the Permian’s hot streak, Hayes said, there was always the sense that the town could lose it all.

“It’s kind of like playing a slot machine,” he said. “You don’t know what (oil) is going to do until it does it.”

Oil did it last month, tumbling into negative prices for the first time in history, as Saudi Arabia and Russia flooded the market with crude and the cornonavirus pandemic shut down large swaths of the global economy, cratering energy demand. Prices have rebounded, but they remain below $20 a barrel — and well below the break-even point for most companies.

People in Kermit remain stunned that in just a month, a barrel of oil went from near $50 to costing less than a 64-ounce (party size) drive-thru frozen margarita. Oil settled at $18.84 a barrel Thursday.

Companies that bet big on the Permian, one of the world’s premier oil fields, started to shut down. Thousands of workers lost their jobs in a matter of days. State officials proposed mandated production cuts, a tool not used in Texas since the 1970s. Regulators vote on the proposal Tuesday.

In Kermit, Covia Corp., a minerals and materials services company, last month laid off 82 of its local employees at a now idle sand mine as hydraulic fracturing, which blasts wells with a high-pressure slurry of water, sand and chemicals to release oil from shale rock, has ground to a halt. At least two more frac sand mines have closed or severely cut back operations near Kermit, ripping through the local economy as companies that haul and deliver the materials also are forced to cut back.

For workers like Jana Chapman, a logistics manager at an oil field services company, that means her job is over. After a year of living at Diamondback RV Park near Odessa, it’s time to pack up and go home.

“This is the trifecta of things that could kill the oil field,” she said, mentioning the presidential election, the coronavirus and the price war. She plans to head to her mother’s home in Alice, near Corpus Christi, at the end of the week. “There’s no work for me to find anymore.”

The logistics operators, truckers, mechanics and others who keep oil fields pumping crude will not only leave behind the pump jacks but also grocery stores, boutiques and restaurants that depend on the influx of workers. Entering what could be the worst bust the region has ever seen, locals are hunkering down, cutting expenses and trying to survive until, they emphasize — not if — oil prices bounce back.

“This business has been through how many busts, and it’s made it,” said Janie Robertson, a manager at Buddy’s Drive-In, a family-owned business known for its steak fingers in Andrews, 35 miles north of Odessa. “We may not make a profit but we’re not going under — that’s my goal.”

Business built on oil

Kermit’s population fluctuates with the boom and bust cycles of oil. The 1980s oil bust, when prices plunged to about $10 a barrel, began a decades-long decline for the small town off the Texas-New Mexico railway in Winkler County.

The population fell from about 8,000 down to below 6,000, according to a Stanford analysis of Census data. The shale revolution spurred by the fracking boom revitalized the Permian and Kermit with it; the population climbed near 6,500 people as workers piled into RV parks and pop-up workforce housing.

But a new oil bust is pummeling Kermit and West Texas again. Sales tax revenues have plummeted 25 percent in Kermit from a year ago. In nearby Pecos, tax revenues are down 20 percent.

Companies that support the oil industry are wondering how to survive. Retailers, fitness facilities and salons popped up to cater exclusively to the oil field workers; now, their customers have packed up and left.

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Sammy Castaneda, a natural gas compressor mechanic, leased space to open a small fitness center in Kermit last February with the idea that workers need an outlet to stay healthy instead of “drinking themselves to death.” Measures aimed at slowing the spread of the coronavirus shut down the gym; the oil bust could keep it closed for good, said Castaneda, who initially invested $10,000 in the business and took out around $80,000 in loans for equipment.

“With the price (of oil) coming down then it doesn’t matter if I get a loan or not,” he said. “If I’m not making money, then I’ll eventually lose it.”

Hotels that usually bustle with men traveling on oil business are vacant. RV Parks that host workers moving from job to job are emptying out. Workforce housing camps that sprouted up in the middle of the desert in the last five years have slashed rates to try to keep workers in town a little longer.

Ralph McIngvale, partner of Permian Lodging, a workforce housing provider that manages camps throughout the Permian and Delaware Basins, said that occupancy is down to an average of 45 percent across the company’s six properties.

At the end of 2019, occupancy was near or at 100 percent at the properties, he said. Some rooms even doubled up — day-shift and a night-shift workers often share rooms to save space and money.

“We’ve got a triple hit,” said McIngvale. “Not only COVID and the slashing of the price of oil, but the fact we’ve got over production. Everyone is getting hurt out here.”

The coronavirus is definitely a factor in the hit that West Texas is taking, but McIngvale and other local business owners — from retail shops to restaurants to oil field services companies — blame most of their sales drop on oil prices.

“This is going to be a fight,” said McIngvale, who has worked in the oil and gas industry since 1979. “You’re going to have to keep cutting wages and keep cutting revenue and find a way to come out on the other side.”

Other business owners are experiencing their first bust. Socorro Barajas, the owner of FR Workwear & Safety Supplies, an oil field clothing outfitter in Pecos, moved to West Texas three years ago because she heard the money was good.

Not anymore. In just one month, her sales have dropped off by 80 percent, she said.

“Everybody talked about oil and the jobs, and that’s why I came,” she said. “It’s bad right now. We’re trying to survive.”

Stuck in towns gone bust

The small communities outside Midland and Odessa, the two hubs of the Permian Basin, are in shock. Workers were laid off so rapidly that many are still loitering around the outskirts of town, social distancing in their trailers and watching their neighbors unhook and pull out.

Some are worried about exposure to the virus during dayslong trips back home. Others don’t have the financial incentive to leave: With business shut down by the coronavirus, there’s hardly any point in spending the money to move if there’s no job to move to.

“I would love to pack up and go home, but right now it’s just not financially feasible,” said Nikki Faulk, a logistics dispatcher. “I’ve gone through all of my savings.”

Forty days after her layoff as a logistics dispatcher for COT Oilfield Services, she’s still living in her fifth-wheel trailer outside of Midland at Golden Rod Park in Gardendale, where she estimates 75 percent of her neighbors have packed up and gone home.

The coronavirus has kept her isolated in West Texas. Her 70-year-old stepmother lives in the house Faulk owns outside of Fort Worth, so she fears putting her at risk. To cope, Faulk, who just received her first unemployment check after weeks of waitng, adopted a 3-month-old terrier mix puppy.

“If it weren’t for her, I probably wouldn’t be doing well, to be honest,” she said. “It’s depressing out here. The feeling is just somber.”

Kenny Comstock, executive pastor at Crossroads, a nondenominational Christian church in Odessa, said his congregation has asked for help with managing anxiety and depression in recent weeks. A lot of prayers are about the price of oil.

“When oil went negative,” he said, “there was a sense that this could be a desert town.”

Here today, gone tomorrow

The boom brought prosperity to West Texas towns, but it did not come without costs. The huge influx of workers to tiny towns meant pop-up trailer parks, now abandoned, crowding the town. Sand trucks barreling down two-lane highways tore up the roads. Traffic choked country roads.

But even as lifelong residents like Hayes, the Kermit florist, grumbled, they knew the economy was indebted to higher oil prices and the people who flock to West Texas to cash in on them. The boom-towners shop in grocery stores, go out for barbecue, and buy flowers to apologize for working long hours away from their partners.

Mother’s Day is typically one of the biggest holidays of the year for Hayes. But this year, he estimates the shop’s sales will fall by at least half. If he can’t keep the losses to 50 percent, he may have to lay off his three workers and run the shop alone.

“They spend money,” Hayes said of oil industry workers, “and that part, yes, we will definitely miss.”

Elizabeth Conley contributed reporting from Odessa. Jordan Rubio and Mella McEwen contributed.

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Erin Douglas covers the local economy for the Houston Chronicle, focusing on energy and the environment. She’s from Colorado and studied journalism and economics at Colorado State University. Follow her on Twitter @erinmdouglas23 or reach her by email at

Sergio Chapa covers the oil & gas industry for the Houston Chronicle and writes for Texas Inc. Sergio was born and raised in the Lone Star State and studied journalism at the University of Texas at Austin. He previously worked at the San Antonio Business Journal, KGBT-TV in the Rio Grande Valley and Al Día in Dallas. You can follow him on Twitter @SergioChapa or reach him by email at

Elizabeth Conley is a staff photographer for the Houston Chronicle. A professional photojournalist for more than 20 years, she still feels she has the best job in the world every time people let her share their stories. Follow her on Twitter and Instagram, or reach out to her by email at

Designed by Jasmine Goldband



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