Fierce Competition in the Eagle Ford

Valley Energy Service
Valley Energy Service

The recent downturn in the oil and gas industry has hit all of the big players hard. But in the Eagle Ford, some small businesses may soon shut their doors due to the fierce competition that has added to the stress of the crisis.

Related:Weathering the Oil Crisis

Today I am featuring an interview with Robert Platts, owner of Valley Energy Service, a crude oil hauling company that has operated in the Eagle Ford since 2012.

Tell us about your experience in Eagle Ford

You guys ran an article about the trucking shortages in Eagle Ford when everything was going crazy in 2010. I was looking to make a move and I settled on the Eagle Ford area because of the industry boom that was happening. We started working with three out of our five trucks and then slowly went to 24/7, and that’s where we have been for two and a half years now.

It seems, though, everybody read your information and it was pretty competitive by the time we got up and running. We have been hauling for one major marketer since may of 2012. It has been good with them but I've had a heck of a time adding new work or clients. It seems there is a “good ol’ boy” network here. It's all about who you know and that’s tough to break into.

The downturn of last year didn't affect us until April, but it has gone from 40 loads a day down to six and then three and about 10 days ago, we have had no more loads. It’s a small company, just me, so it is scary because we've gone through all of our cash. We have been losing money since April and we have less than 30 days before we have to shut the doors.

There is work out there right now but it seems as though a lot of brokers and midstream companies are getting the work. The brokers are really small trucking companies who will land a contract and hire owner operators to run for them. I don't know if the companies are ok with it, but all they are doing is subbing out the work and taking 20% off the top.

So it sounds like you were having trouble establishing yourself in the Eagle Ford even before the downturn. 

Well, trucking is new to me. I have not been in this industry my whole life, which has made it hard to break into because, as I said before, it's all about who you know. But I have been a business owner for 16 years and I have a MBA from Pepperdine University.

We've had reputable records here as far as safety goes, that’s a big concern environmentally. We've had four spills in four years and two of those were equipment failure and the other two were driver errors; that is a pretty dang good safety record. How we can't get work when we are hearing from our drivers that there are other companies who are not as safe and reputable as us -yet still have contracts- is a bit dumbfounding.

We have a great reputation, but we are not seeing the right contacts. We have scoured the markets but it is really competitive right now; the only work is for owner operator rates but it is hard to survive on those rates. But right now I am having to, to see if it will work and get us down the road a little farther and hopefully we can make the turnaround in the industry.

What do you think the future holds?

We are right now finalizing a deal with another mid stream  company who has trucks. We are basically having to run for owner operator rates just to keep our trucks busy. With this new work I may be able to limp through and get to that point where things turn around, but I think it will be a lot different. I think there are a lot of companies who are falling by the wayside. These smaller companies, they are moving out of the area and going to West Texas, or wherever they can. We are looking for work in those places as well, it's just a matter of cash flow for us.


  For more information about Valley Energy Service, visit their website.

Small Businesses in the Eagle Ford Getting Help From Local Colleges

Several universities in the region are stepping up to provide solutions to various challenges created by significant economic growth. UTSA has been active through its small business development center and TAMU Kingsville is adding programs to address challenges as well. If you haven't read the article, Tom Tunstall addressed community planning in the region in the article: Texas Ghost Towns & Implications in the Eagle Ford Shale

"It's like the old California gold rush," said Dr. Stephan Nix, Dean of the College of Engineering at TAMUK. "I mean, that was a great thing, but along with that came a lot of problems and a lot of issues. In many ways, this is the same."

Small and Large Businesses in on the Eagle Ford

Businesses in South Texas all stand to be impacted by the Eagle Ford Shale. Many predict the development of the play will have the largest economic impact of any event in Texas history. This year alone, oil & gas development is expected to add $13.9 billion in direct impact and that number might grow closer to $50 billion by 2020. If you haven't already, you need to consider how your business will evolve with the Eagle Ford.

...It (Eagle Ford Shale) is having a major impact on small business opportunities in and around the 24 counties that sit atop the formation. The total impact is expected to be $13.9 billion this year and increase to $48 billion in 2020. By comparison, the annual GDP of the three county Corpus Christi metropolitan area is about $15 billion. Recovery of oil and gas from tight shale became possible about five years ago with the development of horizontal drilling and fracturing technology. Fracturing of the rock holding the oil and gas with high pressure water and sand releases it to flow to the surface. The Eagle Ford formation is about 50 miles wide and 400 miles long running roughly Northeast from Laredo.

Eagle Ford is expected to be the greatest single economic boom in Texas history. You need to figure out how your business can participate.