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Newfield Exploration : Job losses, new start-ups bring changes in Tulsa's key industry into focus

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06/25/2017 | 06:40pm CEST

Newfield Exploration's Tulsa office hasn't quite been closed a year, but a handful of the approximately 200 employees who lost their jobs have started to drill their own wells in an Oklahoma basin.

Corterra Energy became an Oklahoma corporation in December, several months after Valerie Mitchell, Corterra's CEO, was no longer in charge of Newfield's Tulsa location.

Now her fledgling exploration and production company is grappling with building a business from scratch during a challenging time for energy producers. Mitchell looked for jobs after leaving Newfield but decided to start her own company rather than going to work for someone else.

The talent available after a series of layoffs in Tulsa was a major factor in her decision.

Corterra has 10 full-time employees and about 10 contractors, some of whom Mitchell would like to make full-time.

"I thought there was a lot of talent here in Tulsa," said Mitchell. "I knew there was people that wanted to stay here. ... Apache had left, and you had Essom Energy that left. Samson was kind of struggling. You had other companies that were struggling. ... In terms of a talent pool to build a company, I felt like this was a great place to start."

Newfield's Tulsa office closure was among the rash of layoffs and closures when the price of oil plunged in 2015 due to a worldwide oil glut.

The city's energy industry suffered, particularly exploration and production companies like Newfield. Apache Corp. closed its office. Samson Resources wobbled and headed into bankruptcy.

Other companies, including legacy Tulsa firms, shed jobs that haven't been replaced during the industry's slow recovery.

Employment experts and industry observers say that most of the jobs Tulsa lost aren't coming back. Price-conscious innovation and the dwindling presence of exploration and production companies means if those jobs return, it will be in Houston or Oklahoma City.

However, the disruption has paved the way for start-ups such as Corterra and Atalaya Resources, which was started by Apache veterans before the company's Tulsa office closed.

Tom Seng, assistant professor of energy business at the University of Tulsa, said: "There's no two ways about it. We've lost some large E&P entities. I say large on a Tulsa scale since we're not the home of the majors anymore. ... The question will be what does Samson look like?"

Seng said there's been a shift in Tulsa's employment mix and that's been reflected in the employers undergraduates find after leaving at the University of Tulsa.

"Our students are going to work at energy companies, not just upstream oil and gas, so that has helped us out tremendously."

No going back

"Over the decades, when companies leave Tulsa, they don't come back," said Seng. "We could be at $80 a barrel oil tomorrow, and you're not going to see Newfield go, 'Oh we need to open up an office in Tulsa again.' It's just not going to happen."

Seng added: "The crumbs of the new start-ups are great. Certainly, they indicate that things could be worse without them, but we're not going to get back to the employment levels we had before, especially on the E&P side."

To get there, it may require an energy start-up to become something much bigger. Many mid-sized exploration and production companies started out as startups. Randy Foutch, CEO of Laredo Petroleum, has had success with multiple startups.


Corterra is trying to figure out how to scale its operations - how to partition tasks and build processes. The company, Mitchell said, is figuring out processes that were already established for employees at Newfield or elsewhere.

One example: "Sourcing water and water disposal," she said.

"We've been thinking really hard about that as a company. Do we inject into saltwater disposal? Can I reuse the water? Do I do pits? Do I do above-ground tanks? I've been researching what else is out there, who those companies are, what the cost is and can we do some combination," she said.

The company's size allows it to be nimble and seek out plays where it thinks it can make money, said Mitchell. There's also an added incentive for some of the employees - they have a stake in the company.

"Because half of my team is also investors in this company, they want to succeed and win," she said. "They are what I would call a return-centric team. They understand that it's not about proving something up for science or just getting data. They understand that everything we do has to make money."

Like many energy start-ups, Corterra is also private equity backed, being financed by White Deer Energy, a Texas-based funding group.

Regulatory worries

When Mitchell was at Newfield, she said in a 2015 video interview with Oil and Gas Investor that she felt Oklahoma's basins were good for her employer, in part, because of the stable regulatory environment.

Now as an entrepreneur, she's a little worried about Oklahoma's business climate. While she's happy the legislative effort to raise the gross production tax failed, she's worried about the next legislative session.

The changing price of natural gas ties into that. Mitchell said a price of $3/mmBTU or more is economical for her wells. The price dipped below that late last week.

As a small producer, Mitchell said raising the tax rate could have an undue impact on her margins and her company's success.

"When I said, 'Hey, let's buy this deal on Energy.net. Here's what I think the returns could be,' I modeled that using the existing production taxes," said Mitchell. "So now I've signed the drilling contract, I have a rig coming and all of a sudden there's a lot more political risk with what I've decided to invest my money and investors money with."

"They're gas wells, not oil wells. The returns I'm making are not the kinds of returns that the SCOOP and the STACK or Anadarko basin have. ... If I can't deliver the well I thought I could deliver ... then for me I put my whole company at risk."

© Copyright (c) 2017 Tulsa World. World Publishing Co., source Newspapers

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Financials ($)
Sales 2017 1 850 M
EBIT 2017 589 M
Net income 2017 501 M
Debt 2017 2 119 M
Yield 2017 -
P/E ratio 2017 11,59
P/E ratio 2018 9,93
EV / Sales 2017 4,11x
EV / Sales 2018 3,35x
Capitalization 5 490 M
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Number of Analysts 35
Average target price 45,8 $
Spread / Average Target 66%
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Lee K. Boothby Chairman, President & Chief Executive Officer
Gary D. Packer Chief Operating Officer & Executive Vice President
Lawrence S. Massaro Chief Financial Officer & Executive Vice President
J. Terry Strange Independent Director
Pamela J. Gardner Independent Director
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