As the U.S. oil and gas industry continues to see upward growth, it is becoming more evident that many Oil and Gas companies have impacted the local economy directly and indirectly in several part of the U.S. in the last few years and will continue to do so for next several years.
It would seem that the discovery and development of these new oil and gas discoveries and resources are coming at an opportune time, bolstering both the local and national economy.
The Eagle Ford shale in South Texas which happens to be one the fasted growing area for oil and gas discoveries, runs from the Texas-Mexico border and extends 400 miles toward East Texas, and is roughly 50 miles wide. Estimated to hold 3 billion barrels of oil, it is considered the sixth-largest domestic oil discovery in the history of the United States.
While the Eagle Ford shale produces both oil and natural gas, other high-growth areas, such as the Marcellus shale in Pennsylvania, Barnett shale in Texas, New Albany shale in Illinois, and the Haynesville shale in Arkansas produce natural gas only.
The Bakken shale (which lies beneath a vast majority of North Dakota, Northwestern South Dakota, Eastern Montana, and the lower part of Manitova and Saskatchewan, Canada) covers an area encompassing 24,000 square miles, has brought so many jobs and growth to North Dakota . Named after Henry Bakken, landowner of the property that was the site of the first oil well drilled into the shale in 1953, the shale is rich in an organic material called Kerogen, which when heated or broken down by organic means, gives off both natural gas and oil. The Kerogen is accessed via horizontal drilling and hydraulic fracturing, or fracking.
What does this mean for local economies?
Jobs in the oil field tend to pay double the median wage in areas where they are common. And with an increased focus on trying to expand what is available already in the U.S., this could lead to even more jobs as pipelines to transport the oil are constructed, refineries are built to process the oil into fuel, and tankers are added to transport the fuel once it has gone through the refinement process. The oil and gas industry looks to be at least one answer to a lagging economy and high unemployment rate in the U.S.
Surging drilling activities in these regions have brought strong employment and wage growth to most of the surrounding counties and cities. There is also sign of a strong retail sales growth in these regions which has led to sharply in¬creased state sales tax payments. While recent activity is impressive, more growth may lie ahead to meet demand. The scale of development has surpassed the capacity of local industry. Hotels, restaurants and gasoline stations are jammed with outside managers, crews and technicians.
North Dakota reported the nation’s lowest unemployment rate in December at 3.3 percent, compared to 8.5 percent nationwide, according the Bureau of Labor Statistics. The state is also seeing significant wage gains, with the average annual salary growing 79 percent in Williams County, to $56,857 in 2010 when compared to 2005, and 67 percent in Mountrail County over the same period, according to the bureau.
Funding Gap
Along with these new avenues of revenue, growth and employment comes the need to develop these areas further. With every economic opportunity comes growing pains for businesses and changes to a very rural areas that have not seen significant economic opportunities for decades. Another side effect is the reluctance of banking institutions to provide funding options to companies operating in these regions and are trying to expand their business in those specific regions. These companies need to solve their working capital and monthly cash flow issues in order to hire more crew, buy more equipment, pay for day-to-day expenses and make future investments in the local economy.
While it typically takes anywhere from 30 to 90 days for oil and gas businesses to get paid on from outstanding customer invoices, most small oil and gas businesses need a more immediate, creative solution to access funds and working capital to survive and thrive.
With most of the bigger companies involved with oil drilling — being well established and controlling around 80% of the market share, it is the smaller oilfield businesses that can benefit the most from fast access to cash in order to grow their business and compete with the larger companies.
As emerging and booming markets in the oil and gas industry continue to grow, small oilfield businesses in need of working capital will increasingly turn to alternate financing methods. Through alternative financing methods, such as Oilfield Invoice Factoring or Accounts Receivables Financing, oilfield contractors and businesses can generate fast working capital to meet their short-term financing needs while continue to stimulate the local economy.
