Sunday, November 23, 1997
Natural gas boom sweeping South Texas
By ANNE REIFENBERG and MICHAEL TOTTY
The Wall Street Journal's Texas Journal
FREER, Texas -- There's a boom sweeping across the plains of
South Texas, and it has nothing to do with Nafta.
Home to a geologic formation known as the Lobo trend, which
holds trillions of cubic feet of natural-gas reserves, the region
is raking in the benefits of the biggest onshore gas play in the
state. Activity had been on the upswing for a couple of years
when Conoco Inc. sent it soaring in June with its purchase of
$1 billion of acreage and other assets in the area. The launch
of Conoco's five-year plan to invest more than $1 billion and
drill nearly 200 wells annually is bolstering the fortunes of
towns from Alice to Zapata.
"Energy is back," declares David Puig, deputy director
of the Laredo Economic Development Foundation. "We didn't
think it would be this big."
The signs are everywhere in recently sleepy communities in
Webb, Duval and Jim Hogg counties. Restaurants boast waiting lists,
and motels regularly post "no vacancy" signs. The roar
of the 18-wheeler truck traffic is so loud that some folks have
"Kids aren't used to having to look both ways before they
cross the street," says Veronica Gonzalez, an accounts-payable
clerk in Conoco's field office in Freer.
While the reinvigoration of the energy industry has certainly
made its mark over-seas and in the Gulf of Mexico, and in energy-intensive
corporate headquarters like Houston, the domestic onshore hot
spot is around the Lobo trend.
In the Texas Railroad Commission's 15-county South Texas district,
applications for drilling permits are the highest in the state.
For the past three years, the district has led all others in the
number of completed gas wells. The 818 wells finished off so far
this year represent a 10 percent increase over the same period
in 1996, and account for 22 percent of the state's total gas-well
Some 1.3 billion cubic feet of natural gas were produced in
the district in 1996, the last full year for which figures are
available. Commission officials say the direct economic value
of that activity was about $3.1 billion. But they figure the actual
contribution to the local economy, considering the multiple effect
of every dollar expended, was about $8 billion.
"There's nothing like this in this part of the world,"
says Railroad Commission Chairman Charles Matthews of South Texas.
How do those impact numbers break down? One Laredo Western-wear
shop owner sold 130 work boots to a rig crew - the biggest sale
he can remember making in one day, even one week. A waitress at
La La's restaurant in tiny Marindo City is now earning more in
tips than she has in a decade.
Or take Eddie Aguero. After 10 years as a foreman for a Laredo
heavy-equipment company, energy-services firm Weatherford Enterra
Inc. hired him away in July and trained him to be a sales representative.
When he first heard about the gas boom, he had wondered what it
might mean to him, and now he knows: a 20 percent pay hike and,
for the first time in his life, health insurance and a 401(k)
"It's the best thing that's happened down here in a long
time," says Aguero, a 39-year-old father of three, as he
drives through the territory he serves.
"Everybody's talking about what's going on in the gas
fields, and hoping they'll get one of the next jobs."
Adds Tano Riojas, district manager for Weatherford: "We've
tripled our work volume. It's wild."
There are those, in fact, who think that the business of looking
for, producing and transporting natural gas might be of more local
significance than the commerce created by North American Free
Trade Agreement. Puig of the Laredo Economic Development Foundation
shies away from making that prediction, but reckons that "it
could be close. It's definitely having a domino effect."
P.R. Arguindegui Jr., president of Arguindegui Oil Co. in Laredo,
agrees. "It's going to be a close battle. -1/8The gas boom-3/8
will snap at the heels of what Nafta is doing."
To be sure, people here know better than to lay big odds on
this boom's longevity. They remember as well as any in the state
how quickly the last burst of prosperity fueled by oil and gas
bit the dust, and how badly that hurt. And, around Laredo, memories
of the devastation wrought by the peso devaluation in 1994 are
"Everybody's talking about -1/8the boom-3/8 lasting five
years," says Riojas. "But everybody has heard them cry
wolf too many times before."
Still, early signs are that the renewed interest in the Lobo
trend has staying power. For one, the dozens of companies active
now in South Texas have made substantial investments in the Lobo
There aren't any "fly-by-night" outfits operating
these days, says Mike Flores, safety and personnel manager for
Grey Wolf Drilling Co. in Alice.
"It isn't crazy like it was the last time," he says.
"Everything was pretty well overinflated back then, but now
there's a tighter rein, tighter control. Sure, it could all shut
down tomorrow, but I don't think that's going to happen."
Ted Davis, Conoco's vice president for exploration and production
in North America, says natural-gas prices "would have to
go awfully low" for the DuPont Co. subsidiary to change its
Energy companies learned after the price crash of 1986 how
to be profitable even when gas is selling for well under $2 per
thousand cubic feet - it's trading for more than $3 now on the
New York Mercantile Exchange - and advancements in technology
have cut many costs to the bone.
"We'll meet our drilling goals, and then some," Davis
The company's goals are ambitious. The purchase of acreage
and assets, including 1,100 miles of pipeline, from Trans-Texas
Gas Corp. marked Conoco's largest-ever acquisition; the company
says it wants to use the purchase to double its natural-gas production
in the U.S. to two billion cubic feet a day by 2002.
Whether the company meets that goal or not, its efforts will
have a big impact on the region. Conoco's spending over the next
five years is expected to have an economic impact of $700 million
Consider that the company forks over some $11,000 every month
to a local cellular-phone company, and that it spends $250 every
other day to buy water in Laredo and truck it to its Freer field
And all that doesn't take into account the money already flowing
into the economy from Enron Corp., Texaco Inc., Coastal Corp.,
Chevron Corp. and others.
"What Conoco is doing creates a certain synergism,"
says William Fisher, a geology professor at the University of
Texas at Austin. "It creates more activity."
That, in turn, creates jobs -- vital in a region where the
unemployment rate is over 10 percent. Houston-based Producers
Assistance Corp., which finds workers for energy companies looking
for staff and then contracts the employees out, has already hired
70 people for Conoco. The payroll is around $1.5 million, and
more hires are to come.
"It's a fairly large concentration of business in a relatively
small geographic area," says Gary Dean, vice president of
marketing for Producers Assistance. "It is really having
a significant impact on people's lives."
That is in part because Conoco, the producer with the most
aggressive regional drilling program right now, relies heavily
on outside contractors, while TransTexas sought to perform most
of its well-completion, perforation, wire-line and other work
on its own. And TransTexas lacked the financial muscle to invest
the money experts say is needed to flush out the gas reserves
in the 215,000 acres of leases acquired by well-heeled Conoco.
For companies like San Antonio-based Dawson Production Co.,
that has been a boon. Employment at its yard in Freer is up two-thirds
to 75 workers, and the company is running as many as 14 completion
rigs at a time in South Texas now, a 75 percent hike from a year
To keep up, Dawson is taking rigs out of mothballs and moving
some into the area from as far away was Northeast Texas. Even
so, demand is such that Dawson could put more rigs to work if
the company could only find enough skilled workers to operate
"One of the most critical shortages facing the industry
right now is experienced or trainable people to work in the oil
fields," says Jim Byerlotzer, Dawson's chief operating officer.
Before the Conoco purchase, spurts of activity would be followed
by periods of little or no work, Byerlotzer says, making it hard
to keep skilled workers around. "We were pretty much on a
roller coaster," he says. "Now there's some steady employment."
That means a good deal to people like Aminta Falcon and Helen
Lozano, payroll clerks in Conoco's Freer office. Before Conoco's
big acquisition, Ms. Falcon was working as a secretary on a contract
basis for a local public school and Ms. Lozano was a student at
Laredo Community College, about to graduate with an associate
degree in computer sciences.
Ms. Lozano was worried that she would not find work, and Ms.
Falcon was never certain that her contract would be extended.
Now both have full-time positions with health and retirement
benefits. "Jobs like these were unheard of before, absolutely
unheard of," says Ms. Lozano. "You just can't imagine
the difference it's made for so many people. ... We thought our
little towns were dying, and now they're not."
Send a Letter to the Editor about This
Story | Start or Join A Discussion about This Story
Send the URL (Address) of This Story to A Friend:
Abilene Reporter-News / Texnews / E.W. Scripps. Publications