Texas is used to oil cycles. North Dakota isn’t.
The North Dakota Boom That’s Going Bust After Oil’s Plunge
http://www.thefiscaltimes.com/2015/01/12/North-Dakota-Boom-Thats-Going-Bust-After-Oils-Plunge
The breakeven oil price, the price level needed to drill a new well, for Divide County is $85 a barrel, according to the state; for Williams, it’s just $37. The difference is due to geology, among other factors.
It is perhaps little surprise, then, that a company focused exclusively on Divide County has emerged as one of the earliest hit by the collapse in oil markets. Last week American Eagle Energy Corp said it had stopped drilling and sold off its oil hedges for a cash infusion. Only a few are holding out, hoping things turn around.
Yup, Midland learned from Houston in the 80’s.
The company I work for is involved in ND work. In particular, I have been involved in development work (housing and other new infrastructure).
First, the locals point to two previous bust cycles within their lifetimes. So, the boom/busts haven’t been as pronounced or well known nationally, but they have happened there.
Second, the locals have been very reluctant to build too much, too fast. This is why its hard to get a hotel room near the oil patch...and why they have expanded schools with trailers, but resisted large scale projects to expand schools.
In a lot of ways, they are prepared for the bust in ways that Texas isn’t. We’ve worked on a few ‘man camps’...very temporary housing - compare that to all the new apartments in Midland. One of the subdivisions I did work on was unusual - the roads were gravel, and the developer planned on putting in pre-fab homes - so when the day came and the oil workers left, he could buy back the lots, drag the houses off, and return the area to its used as a hay field.
I think ND will weather this as well as Texas.
Also, there’s a differentiating factor which makes this different than previous busts. When a well is fracked, I am told, it does not harm the well or reduce its ultimate production if you let it sit for a year - almost like turning a faucet on and off. So even if a bunch of companies go broke, when all the dust settles, somebody will sill own a well that can be ‘turned back on’ when the price rises again. So the region can almost instantaneously respond to a price increase...no dragging feet to see how long the next boom might last. Almost as good as owning a bunch of oil in a storage tank, and just waiting for the price to go up.
I can only imagine how tough it’s going to get up there, especially all of those high-paying service sector jobs that are about to vanish.