Dean Barber

U.S. Oil is Poised for a Comeback

In Corporate Site Selection and Economic Development on July 17, 2016 at 9:59 am

She seemed upbeat despite her circumstances. We met her back in the spring at an eatery in a small town in West Texas on our way back to Dallas.

She was a waitress there, the victim of an industry slowdown that has dissolved a third of the Texas petroleum workforce in the past two years. Friend and colleague consultant Tim Feemster and I couldn’t help but ask her questions and she didn’t mind answering.

She said that she and her family had moved from Pennsylvania to Texas about five years ago to work in the oil fields. Times were good then and so was the money. While working as a safety officer for a drilling company, she was making a six figure salary, about five times more than what she was making in the restaurant.

“But just you wait,” she said with a smile and nodding with certainty. “The industry will come back, and I will be back at it, too.”

Her optimism appears to be warranted, according to a recent report by Goldman Sachs, which states that U.S. oil industry is about to stage a big comeback from the painful downturn and big job losses caused by oversupply.

More Production, More People

Goldman is forecasting American oil production to resume growing next year after the recent drop to two-year lows. About 700 oil rigs will be added to production — and each one supports an average of 120 to 150 employees.

As more oil fields come back on line, there will not be enough people to do the required drilling, well completion and other related work. To keep up with the expected ramp-up in drilling activity, the oil and gas industry would need to add 80,000 to 100,000 jobs between now and the end of 2018, according to the Goldman report.

In a blog entry/podcast last week, famed oilman T. Boone Pickens, sat down with John Hofmeister, a former president of Shell Oil, who predicted the price of oil will reach $80 a barrel this year and possibly go as high as $100 a barrel in 2017.

Those gentlemen know a lot more about oil than I ever will. Still, I tend to believe that nobody really knows what oil prices will be in the future. It would not be shocking to me for oil to hover around $50 per barrel for the foreseeable future.

Indeed, cheap oil, which wiped out nearly 170,000 oil and gas jobs nationwide since late 2014 and bankrupted more than 80 energy producers and oil-equipment suppliers in Texas, might be the new normal.

Cost Cutting Creates Opportunities

The oil market collapse (it bottomed out at $26 a barrel this past February) did fix one of the industry’s biggest problems: high cost inflation. In a low cost environment, companies have had to cut costs to avoid bankruptcy.

“Costs had gotten pretty astronomical,” said R.T. Dukes, an analyst at the energy research group Wood Mackenzie in an interview with theSan Antonio Express-News. “In a high-price world, you really seek out production at all costs. When prices are low, you focus on costs.”

Cost-cutting measures and layoffs have brought the cost of pumping shale oil in Texas down to $41 a barrel. The recent surge in oil prices back to around $50 a barrel is already encouraging more U.S. production.

Wood Mackenzie says oil companies in West Texas can make money in the Bone Spring and Wolfcamp oil plays with $37 a barrel oil, while their rivals in the Eagle Ford Shale in South Texas could turn a profit at $48 a barrel. The average break-even price in North Dakota’s Bakken Shale is $58 a barrel, while in Oklahoma’s Scoop region, it is $35 a barrel.

A Failed Strategy

U.S. oil production recently dropped below the 9 million barrel mark for the first time in nearly two years, caused in large part by a supply glut created in large part by a relentless pumping strategy employed by OPEC nations designed to deliver a deathblow to American producers. But the attempt has failed, as production in the U.S. is still twice of what it was in 2008.

Goldman Sachs predicts rig counts will double to 909 by the end of 2017, and that the supply from the Lower 48 U.S. states could increase by 600,000 to 700,000 barrels per day between the fourth quarter of 2016 and the end of 2017.

As more oil and shale companies in Texas and North Dakota start pumping again, that could keep a lid on gasoline prices, always welcomed news for consumers.

The U.S. Has the Most

What’s more, the U.S. holds more recoverable oil reserves than Saudi Arabia and Russia thanks in large part to its shale oil, according to a recent report by Norwegian consultancy Rystad Energy.

The U.S. currently holds an estimated 264 billion of barrels of reserves in existing fields, discoveries and yet to be discovered fields, according to Rystad.

That compares with 256 billion barrels for Russia and 212 billion barrels for Saudi Arabia.

More than 50 percent of remaining oil reserves in the U.S. are unconventional shale oil with Texas alone holding more than 60 billion barrels of shale oil.

But A Finite Supply

Still, it remains critical for the U.S. to focus on developing other, renewable forms of energy.

Rystad Energy estimates total global oil reserves at 2092 billion barrels, or 70 times the current production rate of about 30 billion barrels of crude oil per year.

“This data confirms that there is a relatively limited amount of recoverable oil left on the planet. With the global car-park possibly doubling from 1 billion to 2 billion cars over the next 30 years, it becomes very clear that oil alone cannot satisfy the growing need for individual transport.”

The Great Crew Change

In addition to having to cut costs to remain viable in a low-price environment, U.S. drillers are also having to deal with the looming retirement of thousands of older workers.

A demographic hangover is plaguing the industry, stemming from the last great downturn in the 1980s when scores of drillers went out of business, driving a generation away from the business. That has left a shortage of workers in their late 30s to 50s at a time today when companies try are trying to replace the Baby Boomers who make up much of senior management.

This problem is being referred to in the industry as “the Great Crew Change,” with companies trying to plug the gap by training younger employees, recruiting outside the industry and enticing veterans to hang on longer. It’s forcing drillers to hold on to hard-to-replace scientists and engineers amid the current downturn.

John Christmann, the CEO of Houston-based Apache Corp., told Bloomberg that his company runs a three-year professional development program for new hires designed to cement their ties to the business. About half the company’s technical staff are 36 or younger; another third are over 50.

“There’s a big gap from 1985 to 2000 when not very many people entered this business,” said Christmann. While Apache is prepared for the transition, the industry as a whole is “reeling a little bit because we don’t have a lot of those managers,” he said.

The wave of retirements is taking place at a time when the industry is bleeding talent. Oil and natural gas companies have cut more than 350,000 jobs worldwide since crude prices started to fall in 2014, according to a May report by Houston-based consultant Graves & Co.

The American Petroleum Institute says the oil, natural gas and petrochemical industries employed 1.4 million people last year. Companies will need to hire almost 30,000 workers annually over the next two decades to replace departing and retiring employees, according to the trade group.

Postscript: I will be on a long road trip east of the Mississippi in late July and early August and will be available to visit certain communities. See “Clifftop or Bust!” for more details.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.  Mr. Barber is available as a keynote speaker.

When Bad Things Happen to a Community

In Corporate Site Selection and Economic Development on July 11, 2016 at 5:17 pm

I live in Dallas, truly an incredible city, one which I like very much, but which finds itself again bathed in blood and grief.

It was here on Nov. 22, 1963, where President John F. Kennedy was assassinated in Dealey Plaza. Two days later, the Dallas Times Herald put an apologetic editorial on its front page:

“What happened here could have happened in any city. But first there had to be the seeds of hate — and we must pray that Dallas can never supply the atmosphere for tragedy to grow again.”

Dallas was maligned as “the city of hate” and “the city that killed Kennedy.”

A Place of New Beginnings

Laboring under a shadow of guilt, Dallas nevertheless was able to transform itself into an economic juggernaut in the decades afterward. Today, downtown Dallas is brimming with people, restaurants, and businesses. It is a diverse city, Democratic, and pioneering in community policing.

Dallas is the nucleus of a huge metropolitan area, known as the Metroplex — 9,000 square miles harboring 7.1 million people spread over 13 counties and six area codes. This is a vibrant place of opportunities and possibilities, with 20 local companies on the 2016 Fortune 500 list, and an additional 19 cracking the top 1000 largest U.S. companies based on revenue.

And now another front-page editorial, this from The Dallas Morning News, which ran this past Saturday, in the aftermath of the ambush slaying of five police officers, and the wounding of seven other officers and two civilians.

“Dallas is a proud city. Although it is not a new city, it still feels unfinished, like a young adult still holding out for a late growth spurt.

“That sense of continuous change makes sense to us because we live in a place of new beginnings, of immigrants, and of job seekers. A place of friendly greetings and big ambitions, where the next new opportunity seems just around the corner.

“But there is another truth about Dallas. We live together, but we do not often understand one another. This is because of class, sometimes geography and often race.

“We are not unique in this. Americans are living beside one another without understanding one another all over the country.”

Fostering Tribes, Nursing Grudges

In my last blog, “In Celebration of Us,” I tried to focus on the good about America, knowing full well that we have deep-seated divisions based on race, class, religion and even the political views we hold.

And is some respects, digital technology only reinforces our prejudices and civility takes a back seat. As David Von Drehle, wrote in a Time Magazine article, “The Bright Side in America Today,” “it has never been easier to amplify strife.”

“We build communities of our choosing no matter where we actually live, and if we wish, these virtual town squares can endlessly reinforce our existing opinions while redoubling our antagonisms. There are fortunes to be made and careers to be built on fostering tribes and nursing grudges.”

After the recent mayhem in Baton Rouge, St. Paul, and Dallas, I happened upon a story, purported to be Native American in origin, in which a grandfather is talking to his grandson.

“A fight is going on inside me. It is a terrible fight and it is between two wolves,” the grandfather said. “One is bad – he is anger, envy, sorrow, regret, greed, arrogance, self-pity, guilt, resentment, inferiority, lies, false pride, superiority, and ego.

“The other is good – he is joy, peace, love, hope, serenity, humility, kindness, benevolence, empathy, generosity, truth, compassion, and faith. This same fight is going on inside you – and inside every other person, too.”

The boy thought about it and then asked his grandfather, “Which wolf will win?”

The old man replied, “The one you feed.”

The Fire-Eaters

I’m convinced that certain people in high places can actually feed the beast if we let them. And in doing so, they make their communities, our communities, less inviting to others.

Just as there were fire-eaters in the antebellum South on the eve of the Civil War, urging division, there are the fire-eaters among us today and really throughout our history.

Many cities and towns, indeed entire states, institutionalized racism to the degree that people could not even vote. In that environment, many companies refrained from capital investment in those places. For decades, the Deep South remained an economic backwater and you could argue that still exists today in certain places.

In my role as a site selection consultant to industry, I’ve actually a heard a public official make a totally off the wall racist remark in front of a client and me. How that person could possibly think that might go unnoticed is beyond me. Leave it to say, that was one community tour that ended abruptly.

Today, companies have become far more conscious and outspoken on matters of civil rights, because they want to protect and attract their workforce from a bad wolf that some remain intent on feeding.

Leadership Matters

When bad things happen in a community, whatever the cause, it is how a community responds that is most telling.

While time does heal most wounds, this is where leadership really comes to the forefront.  We were waiting for leaders to step forward in Ferguson, Mo., and make a difference and calm nerves, and I’m not sure we ever really saw them.

But Charleston, S.C., was a place to behold. There, it was family members of those slain in a predominantly black church who showed us all grace and bringing a stunned community together through faith and forgiveness. I was dumbfounded.

There is an old saying about a walking a mile in another man’s shoes, before you choose to criticize him. I think we need to do a lot more of that if we are going to build trust and inclusive communities where there are equal opportunities for all who choose to pursue them.

That is the Promised Land that Dr. King spoke. It’s not just for black folks, or Muslims, or gay people. It’s for all of us. We’re in this boat together.

Words Matter

Now I am confident that a grieving Dallas will heal and continue to grow and remain a vibrant city because of the leadership demonstrated by Mayor Mike Rawlings and Police Chief David Brown.

Unlike Texas Lieutenant Governor Dan Patrick who called the peaceful protesters in downtown Dallas “hypocrites” for running away from bullets and expecting police protection during the sniper attack, Rawlings and Brown truly proved to be the adults in the room.

They chose not to use inflammatory language or blame anyone other than the madman who created so much pain and sorrow.

Said Brown, who has made the Dallas Police Department a model in community policing, “All I know is that this must stop, this divisiveness between our police and our citizens.”

“We as a city, we as country, must come together, lock arms, and heal the wounds that we all feel from time to time,” Mayor Rawlings told reporters the morning after the carnage. “Words matter, leadership matters at this time. I’m proud of our chief.”

The Family of Man

I’m not a black, and will never be able to fully comprehend walking in his or her shoes. However, I believe that empathy – doing my best to understand someone on their own terms – is something that I can aspire to. After all, we are all members of the Family of Man.

I may or may not have some advantages by virtue of the fact that within my immediate and extended family are African Americans and Hispanics, whom I consider family, regardless of our differing gene pools.

We talk about all sorts of things – I learned about DWB – driving while black. And while we may not agree on everything, we love and respect each other. I feel blessed to have them near.

Blessed are the peacemakers, for it is they who will heal a community when bad things do happen.

I’ll see you down the road.

Postscript: I will be on a long road trip east of the Mississippi in late July and early August and will be available to visit certain communities. See “Clifftop or Bust!”  for more details.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.  Mr. Barber is available as a keynote speaker.

In Celebration of Us

In Corporate Site Selection and Economic Development on July 1, 2016 at 1:19 pm

In this digital age in which we are bombarded every waking day with all sorts of messages, it is understandable that you may come to the conclusion that the world is going to hell in a handbasket.

My advice to you on this Fourth of July weekend is quite simple. Take a break from the negative. Go ahead and have a hot dog guilt free, and maybe, for at least a few days, avoid watching or reading the news, which by its nature focuses on conflict.

In other words, chill. You deserve it. As a friendly business consultant, I would even advise it. And then hit the ground running next week.

I know I have a couple of books that I want to relax with and look forward to spending time with family.

The Bright Side

And being that this is the 240th anniversary of the United States, I will sit back, possibly with an adult beverage, and read Time Magazine’s latest issue, which is being billed as 99 percent politics free. I will pay particular attention to the cover story on “240 Things to Celebrate About America Right Now.”

I might need this article, precisely because we live in an age of digital upheaval, when many if not most Americans are distrustful of our institutions. I think we all need a little restoration of faith.

David Von Drehle, in an accompanying article entitled “The Bright Side in America Today,” wrote that “it has never been easier to amplify strife.”

“In the space of a generation, we have transformed ourselves from a culture of shared experiences to a radical democracy of personal choice. We now read what we want, not what some powerful publisher chooses for us. We watch what we want, when we want it. We build communities of our choosing no matter where we actually live, and if we wish, these virtual town squares can endlessly reinforce our existing opinions while redoubling our antagonisms. There are fortunes to be made and careers to be built on fostering tribes and nursing grudges.

“No wonder the national mood is sour. The way we work, the way we communicate, the way we mate, raise children and grow old: everything is up for grabs. Such rapid change entails a heavy dose of psychic violence.”

A Nation of Gamblers

And yet, despite all that, America’s faith in individuals remains an essential element of our cultural DNA, who we are as a people.

That really hit home with me when I spent time last month in Dayton, Ohio, where two brothers, bicycle mechanics, figured out how to fly. A suggested good read for this holiday weekend might be The Wright Brothers by David McCullough.

The good news is that we are still a country where world-beating companies are birthed in spare bedrooms and garages. Wrote Von Drehle:

“America is unplanned, nimble, fake-it-’til-you-make-it. It is tons of spaghetti thrown at thousands of walls in the confidence that somewhere, something will stick.”

My hope is that we remain at heart a nation of Mississippi riverboat gamblers. I think Americans, maybe more so than any other people, understand that failure is a necessary ingredient to finding success.

Most of our new businesses will fail, most of our ideas will be half-baked, but that is fine, so long as we keep betting and occasionally winning big.

Our faith in the individual means that we are not a top-down people, but that most of our solutions come from the bottom up. We remain a “git er done” nation so long as government fosters and unleashes our people power.

First generation immigrants, no matter where they come from, are the most entrepreneurial among us. It’s not easy for them to come to America and to essentially become Americans, but they do.

For them, the American Dream holds true, and the rest of us should take note of that true grit.

Make Mine Brisket

Now I am biased by the fact that I reside in Texas. I moved to the Lone Star state seven years ago and have come to love it for reasons that I cannot fully explain. You don’t just move into Texas, it moves into you. Read What Makes Texas Texas.

I happen to believe that one our distinct gifts to the nation is Texas barbecue. Let me tell you, it’s a whole nuther smoke. Make mine brisket.

But I have had the pleasure in my capacity of being a citizen and consultant of traveling all over this country. I’ve not been everywhere, but I have gotten around.

Along the Wasatch Front

I recently spent time in northern Utah, where I discovered a cluster of aerospace and composite companies as well as 21st century digitally based companies.

Two things struck me most about northern Utah – the people were very nice and I think quite industrious. Also, the sheer beauty of the place, characterized by a mountain range called the Wasatch Front. I couldn’t take my eyes off the mountains.

Our Best Idea

I think certain people in certain places are inherently lucky by the fact that they live in places that are marked by physical beauty. And most do not take that for granted.

As Americans, I think we recognize that the physical beauty and nature is worth preserving, which is why we have parks.

Often called “The Dean of Western Writers,” Wallace Stegner called our national parks “the best idea we ever had.”

In their own right, the idea of having national parks are as radical as our declaration of independence. They represent a public trust.

“When we say “My country ’tis of thee” – it’s my country – are we talking about city streets? Are we talking about industrial cities? No. We’re talking about the land we have and there’s so very little of it that’s unspoiled or that doesn’t have a fence through it,” said historian Ken Burns, who made a documentary film on the national parks in 2009.

“Here in these special places that we’ve resolved together as a people to preserve, we feel a sense of commonality. You come to a national park and all of a sudden some of the barriers between people, between classes, even between nationalities are broken down and you share and have the experience of an essential, collective humanity.”

I won’t be going to a national park this holiday weekend, but I hope to visit several this year. You may want to do the same. They truly are our nation’s crown jewels as they bespeak of us as a people.

Well, Almost

We celebrate the Fourth of July a national holiday, but the actual legal separation of the Thirteen Colonies from Great Britain occurred on July 2, 1776, when the Second Continental Congress voted on that question.

After voting for independence, the Continental Congress turned its attention to the Declaration of Independence, with Thomas Jefferson as its principal author, which it approved on July 4.

Wrote John Adams, who would become the second president of the United States, to his wife Abigail: “The second day of July, 1776, will be the most memorable epoch in the history of America.”

Well, he almost got it right.

I’ll see you down the road.

Postscript: I will be on a long road trip east of the Mississippi in late July and early August and will be available to visit certain communities. See “Clifftop or Bust!”  for more details.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.  Mr. Barber is available as a keynote speaker.

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