For more than two years, the Greater Houston area, including Tomball and Magnolia, has awaited the return of domestic oil production growth since the energy downturn began in late 2014.

“The worst is over,” said Patrick Jankowski, senior vice president of research at Greater Houston Partnership, during the 2017 Houston Employment Forecast presentation on Dec. 9.

Despite continued losses in construction and oil field services, Jankowski said GHP projects a net gain of 29,700 new jobs to be created in 2017 in markets, such as health care, hospitality and education.

Oil prices have climbed to nearly $50 per barrel, up from a low of $26 in February, according to GHP.

However, while officials agree a diversified economy and increases in technology helped the northwest region of the Greater Houston area withstand much of the downturn, the rapid growth seen around Tomball and Magnolia at the height of the oil boom will be slow to return until confidence in the economy rebuilds.   

Tomball growth slows

Kelly Violette, executive director of the Tomball Economic Development Corporation, said diversification has been key in Tomball for companies looking to avoid layoffs and cutbacks.

“I think we’re much more diverse than we were in the past, and over time as technology has changed and evolved, it’s changed companies, including companies that were primarily in the energy industry,” Violette said. “They’ve been able to branch out into other industries because of the technology advances. I think that’s definitely helped weather the storm.”

She said Tomball’s proximity to the Grand Parkway and Hwy. 249 has been helpful to attract new companies to the city, particularly in Tomball Business and Technology Park.

In 2016, the TEDC signed a contract with General Electric to build a new water and power facility in the park, while Packers Plus Energy Services, an international oil field services company, completed work in late 2016 on the first phase of a 50,000-square-foot research and development facility.

Violette said new growth is possible in 2017 but likely not until after oil and gas companies have a better idea of what the new administration of President-elect Donald Trump will look like.

“We’re still seeing some tire kickers, but a lot of them are still in that wait-and-see mode to make a big investment right now,” she said.

Baker Hughes, which has a education and training center in Tomball, experienced declines in revenue as domestic production slowed. However, the oilfield services company stayed afloat by consolidating and forming corporate partnerships.

In October, the company announced a merger with GE, which will take a 62.5 percent stake in the oil field services company. Baker Hughes  had also attempted a merger with Haliburton in early 2016 before it was ultimately blocked by the U.S. Department of Justice and terminated in May.

“While we expect the market conditions to remain challenging near term, the structural changes we implemented in the past six months have created a stronger foundation for delivering on our objectives and positioning the company for growth,” said Martin Craighead, Baker Hughes chairman and CEO, in a statement. “I am pleased with our progress and while we have more work ahead of us, I am confident that we have the right people, technology, and strategy.”

Magnolia infrastructure focus

In Magnolia, officials have put efforts into strengthening infrastructure and attracting developers in preparation for economic recovery.

“We no longer understand this to be a downturn—it is in fact a realignment of the Greater Houston area economy, which remains strong thanks to diversification and jobs,” said Tana Ross, economic development coordinator for the city of Magnolia. 

However, Ross said the city expects growth to remain stunted until city transportation projects, such as the Tomball Tollway extension, are complete. During budget hearings for fiscal year 2016-17, the city projected a decrease of 7-11 percent in sales tax revenue as companies struggle to bring profits back up.

Ross said new development will be slow for the new year but is anticipated for the future. She said a combination of diversification and tax incentives have help to keep businesses in the city limits from shutting down.

“We anticipate 2017 to be—at best—flat because of the roadwork in our city,” she said. “Fortunately, most of our oil-related manufacturers here—like L&B Pipe & Coupling Products—diversified years ago.”

A slow recovery

While the energy industry can expect production to pick up again in 2017, experts agree recovery will not truly be complete until oil prices reach at least $60-$65 per barrel, a price that likely will not be seen this year.

Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston C.T. Bauer College of Business, said one of the markers of recovery will be an uptick on operating domestic oil rigs.

In December, Baker Hughes announced the number of rigs operating in the U.S. in November was about 580, an increase from the 544 rigs counted in October and the 509 rigs counted in September. The company saw a 34 percent decline in revenue during 2015.

However, an increase in prices and rigs does not mark employment growth in the industry just yet.  GHP projects losses will still continue in 2017 for the oil services, construction and information industries.

“We’ve come back to about $45 a barrel, and that marks the point where the service companies say [the downturn is] over,” Gilmer said. “Things are picking up. However, we’re going to have a long slow grind in front of us.”

An important sign of recovery for Houston will be the return of jobs to the energy sector. Houston has lost 80,000 local oil-related jobs since December 2014, Gilmer said.

Offsetting the energy sector losses are added positions in the food services, health care, retail trade, public education, entertainment and accommodations industries. Houston has added nearly 27,000 jobs in the service sector in the past two years, Gilmer said.

These new gains can help drive growth in other facets of the economy, such as real estate and retail development, Gilmer said. As Houston’s population grows away from downtown, residents in suburban areas can expect to see continued growth.    

“You see apartment construction and some office construction…following the Grand Parkway out there—that’s where the city grows,” Gilmer said. “That’s where we should be building apartments and houses. That’s where cities should grow—there should be a lot of healthy growth.” 

Additional reporting by Julie Butterfield