Small U.S. frackers face extinction amid drilling drought

Thu Jun 18, 2015 2:15am EDT
 
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By Edward McAllister

WEATHERFORD, Texas (Reuters) - Oil field work was coming in fast when GoFrac doubled its workforce and equipment fleet at the beginning of last year, just one of hundreds of small oil service companies thriving on the revival of U.S. drilling.

    Founded in November 2011 with a loan of around $35 million, the Fort Worth, Texas-based company was by 2014 making nearly that much in monthly revenues, providing the crews and machinery needed by companies including ExxonMobil (XOM.N: Quote) to frack oil and gas wells from North Dakota to Texas.

    Executives flew to meetings across the country in a Falcon 50 private jet, and entertained customers at their suite at the Texas Rangers baseball stadium in Arlington. The firm would soon move into a 22,000-square-foot office on the 12th floor of Burnett Plaza, one of Fort Worth's most prestigious office buildings.

    Eighteen months on, however, without work and unable to meet monthly loan payments, GoFrac has closed its doors, its ambitions gutted by a steep dive in oil prices. Of the 550-odd employees on the payroll at the beginning of this year, only six remain. 

    At GoFrac's only remaining outpost, a small warehouse and 40-acre gravel yard in Weatherford, 30 miles west of Fort Worth, its huge fleet of sand haulers, chemical blenders and pressure pumps that months before were being used to frack U.S. oil and gas wells, sit idle in long rows, waiting to be sold.

    "We knew it was going to be rough, but nobody foresaw what was coming," said GoFrac chief financial officer Kevin McGlinch, who was hired in November 2014 to see GoFrac through the slowdown.

    GoFrac's end mirrored its beginning: steeper and faster than expected and driven by the unpredictable forces of international oil markets. U.S. oil prices dropped 60 percent from June to January due to oversupply from U.S. shale deposits, putting an end to the oil drilling boom and precipitating the sharpest industry downturn in a generation.

    The company's story, recounted to Reuters by six current and former executives and employees, is not an isolated one.   Continued...

 
A crew at the Machinery Auctioneers lot preps equipment for an upcoming auction in Odessa, Texas June 4, 2015.   REUTERS/Cooper Neill