Oklahoma has relied on its energy resources as a major source of state revenue, but with the crash of oil prices, the state has fallen on hard times. The unemployment rate now sits at 4.2% with six straight months of decline. Oil and gas operations represent almost 15 percent of the state’s economy, third only to government spending and transportation and utilities. With the global oil surplus forcing commodity prices lower and lower each quarter, the Oklahoma economy is now limping along at $35 barrel crude. Overall, industry has seen over 13,000 jobs lost and over $200 billion in cuts to investment.
Information from Baker Hughes shows active Oklahoma oil rig counts down to 50 compared to when they were over 200 at the beginning of 2014. Similar trends were witnessed in active natural gas rigs as Baker Hughes reports only 15 active rigs. With high capital expenditures and low trading prices, it is no wonder the state is seeing the lowest rig activity in over 15 years as it continues to drop.
With the drop in rig counts, many thousands of people in Oklahoma have lost their jobs. The indirect effects of decreased oil field activity through the loss of income tax and sales tax has severely crippled the Oklahoma economy as well. Oil production taxes generate around 5 percent of revenue for the state, as reports show that municipal debt from the state has earned almost 3 percent in the past year alone. To make matters worse Bill SB 1246 went into effect at the beginning of the year lowering tax cuts and adding to ever growing revenue side issues.
Governor Fallin has been working with the Oklahoma government and energy industry to help mitigate the situation. “Despite [recent] successes, Oklahoma still faces substantial challenges, particularly the state budget,” Fallin said in a statement a few days ago. “It will take everyone working together to deal with a $900.8 million appropriated budget hole caused in large part by a 70 percent drop in oil prices over the past 18 months”.
The third largest producer in the state, Chaparral Energy, has seen over 150 positions cut at their headquarters in Oklahoma City alone. Helmerich & Payne Inc., the Tulsa based operator, reported they will be forced to lay off as many as 2,500 employees until rig activity improves. Companies are working with Fallin’s 10 percent cut in non-essential expenses along with continuing slash capital expenditures and company investments in attempts to meet earnings goals.