Questions remain after tough year in North Dakota oil patch

Amy R. Sisk
Bismarck, N.D., Tribune

BISMARCK, N.D. — Kyle Ostrand found himself looking up townhouses in Williston, trying to talk his workers into becoming roommates after the oil price collapsed last year.

Some of them without families in town agreed to live together, and although they don’t necessarily work long hours anymore to bring in big paychecks like when oil was booming at the start of 2020, they’re still employed by 3 Forks Services. The company provides transportation, logistics and crane services across the Bakken oil patch.

“It’s made it a whole lot more affordable for them to share housing like that,” Ostrand said. “We’re trying to do what we can to help lessen the expenses for these guys in any given month and hope they can continue to help ride it out with me. We’re in it together trying to help make ends meet.”

Hundreds of businesses like 3 Forks do the boots-on-the-ground work in western North Dakota to help big-name companies drill and produce oil. They have endured a year of hardship as the coronavirus pandemic decimated the demand for oil and, thus, for their services, The Bismarck Tribune reported.

The oil industry’s recovery has been slow. Job Service data show that North Dakota’s biggest oil-producing counties lost well over 10,000 jobs last year. Their unemployment rate at the end of 2020 was 7.9%, up from 1.8% a year earlier and higher than the current statewide average of 4.1%.

On top of that, a cloud of uncertainty hangs over the Bakken as Congress turns blue and a new presidential administration takes over that appears poised to crack down on the fossil fuel industry in an effort to curb climate change.

Activity across the Bakken hinges largely on the price of oil, which determines whether pumping up crude and drilling new wells is profitable.

Oil was trading above $60 per barrel when 2020 began, but by the start of March the looming coronavirus pandemic threatened to sink demand. Russia and Saudi Arabia played a game of chicken with their nations’ oil outputs, resulting in the first major price collapse.

Then, the spread of the virus prompted world leaders to enact travel restrictions. Many people across the planet began to work from home and stopped visiting others, causing demand for gasoline and jet fuel to tank dramatically.

“It was like going full steam ahead in a steady oil market to slamming on the brakes as hard as you can and screeching to a stop,” said Lucas Dunlap, head of LDI Energy Services in Tioga.

One tumultuous day in April 2020, the price of West Texas Intermediate, the U.S. crude benchmark, turned negative as space to store crude filled up.

That was a telling moment for Alma Cook, who runs Williston-based Cook Compliance Solutions. She spent that morning with a colleague who works as an oil and gas business consultant.

“She turned on the TV and was like, ‘Alma, something’s going on.’ Over the course of the day, we just watched that price plummet,” Cook recalled. “It was scary, and I didn’t know what that would mean for the next year.”

Cook’s company, like so many in the oil patch, took a hit.

She said her business “stands in the gap” between oil field service providers and major producers, helping the smaller businesses obtain the right safety certifications, insurance and other measures needed to work under bigger companies.

“A handful of our clients went out of business altogether,” she said. “Others put their operations on pause and had to cut our services because there just wasn’t work coming down the pipe that they had to get compliant for.”

During the downturn, her company formed a new partnership with an insurance provider and focused more on helping oil field service companies save money.

For example, Cook Compliance Solutions created free pandemic preparedness and drivers safety programs. Many service providers need to have programs like that in place to get hired by producers, and Cook’s company enabled them to customize its templates and download them online.

“The response to those freebies has been overwhelmingly positive,” she said. “It’s led to new connections from all over the country.”

Her company tracks the hours her clients work in the oil fields and noticed a dramatic decline after the price collapse last spring. But their hours improved substantially in the last quarter of 2020, possibly due to federal coronavirus stimulus money the state designated for the oil industry, she said. Tens of millions of dollars went toward plugging abandoned wells and providing grants to reimburse the cost of acquiring water to use in fracking new wells.

Slowly over the past year, the price of oil has climbed back to $60 per barrel. That’s not quite high enough to usher in a lot of drilling that would boost North Dakota’s oil output, but it’s been enough to prompt some producers to bring new wells online to maintain production. The amount of oil a single well produces falls over time, which is why a company must drill new wells if it’s to maintain or grow its output.

Dunlap said his employees aren’t working 80-hour weeks like before the pandemic, but there’s work to go around these days at LDI, which does maintenance, construction and trucking work, among other services in the Bakken.

The company dropped from 30 workers before the pandemic to just six at one point last year. It’s since been able to hire back some and pick up new employees for a workforce of 19 today.

“Things seem to be slowly coming back,” Dunlap said. “Having staff back and getting trucks and equipment up and running is great.”

To survive the past year, the company began to look outside the oil industry. It picked up general contracting work for residential facilities, which helped bring in some revenue but “never really took off,” Dunlap said.

Ostrand with 3 Forks took a similar strategy with promising results.

“I just looked at the equipment we had in our yard and our employees in the shop,” he said. “I was trying to find something by looking at the other industries outside the oil field that hadn’t really been crippled by the COVID situation.”

He settled on civil construction, and 3 Forks began putting up cellphone and utility towers.

“We found some companies that gave us a chance to get our feet wet,” he said.

3 Forks installed towers in the North Dakota, South Dakota, Wyoming, Colorado and Montana. That work “carried us through the second half of 2020” and will help the company survive in 2021, Ostrand said.

“Once the weather breaks and things start to thaw out this year, we’re planning to hit the ground running,” he said. “That will be a huge part of our workload and what keeps our guys busy.”

Jobs in the oil patch are still volatile. The company will be “scrambling to get enough guys to get enough trucks for what is needed one day, and then everybody is standing around the next day,” Ostrand said.

3 Forks, LDI and Cook Compliance Solutions are hopeful for a better year, but their owners acknowledge challenges ahead even as the oil price recovers.

Some producers have indicated to them that they aren’t planning much activity in the Bakken this year, whereas others have been busier as they frack new wells. The latter scenario gives business owners such as Ostrand a touch of hope.

“It’s kind of all over the board,” he said.

Recent activity across western North Dakota has been a positive sign for Dunlap as well. Last week, his company on Facebook asked for experienced workers to send in resumes, as its workload “is steadily beginning to turn around.”

But Dunlap, too, is cautious.

“Where it’s not looking so good is the administration in D.C.,” he said.

President Joe Biden has taken a number of steps his first weeks in office that target the oil industry. He withdrew a permit for the Keystone XL pipeline slated to run from Canada into the Midwest. He’s expected to crack down on emissions of methane, a potent greenhouse gas that can leak from oil facilities and contribute to climate change.

Biden also has paused oil and gas leasing on federal land.

It’s unclear if he’ll wade into the fight over the Dakota Access Pipeline, which is responsible for moving half of North Dakota’s oil output of 1.2 million barrels per day to market. But past presidents have inserted themselves into the dispute between the Standing Rock Sioux Tribe and the U.S. Army Corps of Engineers. The corps last month asked for more time to address whether it will require the pipeline to shut down in light of a judge revoking a key permit, while it briefs Biden officials on the case.

Cook, like so many others in the Bakken, is watching those developments closely.

“Pricewise, if they leave us alone from Washington, I expect that it’s going to be a good year,” she said. “But there are just so many question marks.”