Feature: "Toughest town of Texas" tries to weather tough time of low oil price

"We've seen a lot of ups and downs in oil industry, so I think this community has become resilient somewhat to the price structure," said Mr. Trey Bailey, executive director of the Luling Economic Development Corporation in Texas, the United States.

While energy officials and experts from all over the world expressed their worries over oil price related issues at the IHS CERAWeek in Houston, residents of Luling, one of the most well-known traditional oil towns in Texas, showed unusual calmness to the continuous oil price drops over the past three years.

"We've seen it all before. I think it will change, come back around, the price will come back around because of supply and demand," Bailey said.

About 130 miles (209 kilometers) west of Houston, Luling was known as the "toughest town in Texas" because of the contempt of law by the cowboys in 1880s, when Luling was a center for rail transportation of cattle.

Now nothing is tough here, instead, it's a quiet and peaceful place to an outsider. With a population of around 5,000, the town has a short main street, with an oil museum, which is the town's pride, restaurants and other business buildings standing on one side, and pumping machines scattering on the other. There are cowboy-dressed men sitting in pickups, even they speak softly and friendly.

Luling's first oil well was drilled in 1922 by Edgar B. Davis, oilman and philanthropist who was born on Feb. 2, 1873, in Brockton, Massachusetts.

In peak time the town produced over 11 million barrels of oil annually and was one of the United States' largest oilfields, when most of the country's major oil companies were doing business here. With the draining of the underground "black gold," all of the big names have moved out, leaving small independent developers operating these stripped wells with daily output of barely a few barrels a well.

People may have been used to price fluctuations, but the dramatic oil price drops have really hit hard on the industry and people depending on it.

"The unfortunate thing is, now we're seeing a lot of people who have lost their incomes, source of income. That's tough," Bailey said. "All of a sudden, the rigs got pulled out when the price of oil went down. People were not drilling, the service companies got shut down, we saw a lot of people who lost their jobs."

He recalled the good old days, when oil prices stayed high at above 80 dollars a barrel, people in the town were driving Cadillacs and buying new cars.

But now people have throttled down on their spending. The average person was making 60,000 to 70,000 dollars at boom time and now, if they're even working now, the figure is only 25,000 annually, he said. "I have several friends who are now looking for other jobs."

"It has all the ingredients to be the worst, and it may not be the worst yet," he stressed.

James Montgomery is president of Progress Drilling, a small drilling company with two rigs. One of the rigs is operating in the field, while the other stands idly in the yard of his company, together with piles of drilling machines and parts.

"Our profit margin has gone down 55 percent," he said. "In a good year, we can drill 60 wells with the two rigs. We've drilled six wells this year. Normally, that would be eight to 10 wells right now."

He said there are two other drilling companies in Luling, which are in the same situation and not working like they used to.

"People are still adjusting to lower prices," he said. "This is a time when you just have to be in survival mode. You have to cut your expenses and some people will survive and some won't."

He said he is hoping to break even and do a little bit better. That's what people are trying to do right now.

His company has a crew of 40, last year it was 49.

"We have to lay off people," he said. "We tried not to. We tried to keep as many people working as possible. In a small town, that's pretty important. We all work together, tire shop, car parts, we're all involved in this together. We try to do as much as we can to help people going through it."

"People have all cut back," he said, giving an example that a company he knows in Oklahoma had 40 people working up there and now they have only seven.

Luling is only 15 miles (24 kilometers) to Eagle Ford Shale Basin, the most prolific shale oil basin in the U.S., so despite the draining of the town's oil reserves, a larger part of local residents are still living on oil-related businesses.

"Now the interesting thing is the Eagle Ford has slowed down because of the price of oil; it has the residual effect on the entire economy of the town," Bailey said.

He said if oil prices remain low at 20 to 30 dollars a barrel, local companies would get squeezed out in not too many years.

But in his opinion that would not happen. "I would hope that within a year we'll see prices back that are above 60 dollars. Sixty dollars is a benchmark where people can make money and still keep people employed," he said.

Montgomery holds similar view on oil price trends. "I don't think anybody has lost hope because this isn't the first time this has happened. We just got more supply now than we have demand. But that will equalize at some point. And then prices will recover," he said.

"We ride the waves, kind of, high points and low points," Bailey said. "One thing I can say, and I've lived here all my life, is that we've seen is the people don't get too excited when the price is up high, they don't get too worried when the price is low." Endit