Investing in west Texas....Pecos

[James Richards]

I'm hoping someone here has some insight into the market in west Texas, specifically Pecos and Reeves county.  I have been offered an investment opportunity that cash flows very well on a new construction duplex.  Builder claims very high occupancy rate due to big oil boom in that area after discovery of possibly the biggest oil field in the world late last year.  The economy is ramping up in that area to support the massive drilling/fracking that is to come with housing being a major player.  Is there anyone from that area that can confirm or report on what is happening there?

[Wesley Branaman]

I am currently employed in the oil field and I used to work in that area about 7 years ago. Drilling requires a fairly large staff of people. The more drilling, the more people needing a place to sleep.

Keep in mind that when oil prices rise or are high, there will be a high demand for housing and/or places to rent. The drilling companies are the first to show up (boom) and the first to almost completely vacate an area (crash) and variable demand between those times.

Now I know many good honest people that work on the drilling rigs and most companies have strict policies. However, some of the folks working for the drilling companies are those who are going to be your rougher tenants. Again, this is not a stab at all drillers but as a word of caution that this is typically more common with this type of tenant.

There are several different job types and stages in the oil field.

Beginning of a well:
Construction crews (builds the pad)
Drillers
Pipeliners (come and go as well depending on the current pipeline infrastructure or lack thereof)
Truck drivers (equipment)
Fracking crews.

After well construction:
Construction crews/welders (build compressor stations and/or transfer stations)
Truck drivers.

After well, pad and construction is completed: (These are your more steady, longer term tenants)

Pumpers/gaugers (maintain the well and oil/gas production from the well.)
Production employees (manage the flow of gas and oil and sends those products to the buyer)
Mechanics/maintenance employees (maintains compressor stations and other equipment)
Environmental regulatory compliance employees (small number of these people)
Truck drivers.

I'm sure I have missed a bunch and not every well and/or company operates exactly as stated but that is the basics of it.

I'm not sure if you wanted to read all that. 😄

My personal opinion is yes you can make a lot of money if you play your cards right but it's up to you if the reward is worth the risk. Nobody really knows how stable the oil field will be but I can just about promise you, the oil field isn't going away in the near future, but it will probably be a roller coaster ride as in it's history. It seems to me that about every 10-15 years there is a boom and crash so as long as you have an exit strategy and plan on the crash happening, and the numbers still work even through the crash, I think it would definitely be worth considering. Just be cautious and plan for the unstable times.

Hope this helps.