Spring, Klein endure oil and gas downturn

Rig counts are on the upswing, which translates to job growth in the oil and gas sector.

Rig counts are on the upswing, which translates to job growth in the oil and gas sector.

The fallout of the Greater Houston area’s oil and gas downturn, which can be traced to the collapse of oil prices that began in 2014, reverberated in Spring and Klein in 2016.

As a testament to the downturn, some Spring and Klein businesses had to lay off employees or adapt to the sluggish economy with concessions. Several businesses even closed their doors for good in 2016.

Signs of an upswing are evident, however, according to experts at the Greater Houston Partnership and Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston C.T. Bauer College
of Business.

“We have definitely seen oil- related employment begin to stabilize,” Gilmer said. “We’re no longer seeing the big losses we saw, and we may have hit bottom in terms of the job losses in energy.”

Spring, Klein endure oil and gas downturnLocal economic challenges

Southwestern Energy Company’s layoffs last January portended a rough year when the company, headquartered in Spring, had to let go of 300 Houston-area employees. Trouble started for Baker Hughes in 2015, when it reported a 34 percent decline in revenue. However, Baker Hughes announced a merger with G.E. Oil and Gas in November, which is expected to close in mid-2017.

The effects of the downturn persisted among other Spring and Klein businesses as well, with many ending up shuttered this past year, including the iconic Texas Repertory Theatre on Stuebner Airline Road, citing financial reasons.

“The [theater] tickets were not cheap, and disposable income is watched more closely when there isn’t confidence in the local economy,” said Larry Lipton, Texas Repertory Theatre board member.

Other businesses have adjusted to the economic conditions by offering bargains. Ahmed Jafferally owns four Houston-area Cypress Station Car Wash locations, including two in Spring and Klein.

With the downturn and significant storms that struck the community in the spring, the business has responded to the decline in customers by offering discounts and price

“When the oil is back up and running, when people go back to work, it helps,” Jafferally said

Rao’s Bakery on Cypresswood has been a hub for Spring and Klein residents for more than 10 years. Manager Jeremy Tortorice said the restaurant has had a decrease in catering requests from oil and gas businesses since the start of the downturn.

“As someone that has worked within the oil and gas industry, I witnessed from the inside out the net result of sustained drop in pricing,” he said. “Had other industries been in a ‘boom’ state such as oil was, this downturn may not have hurt as much.”

The trickle effect of the downturn hurt the community in surprising ways, too, like what has happened with decreased demand for work on oil rigs.

Fallbrook Church, located south of FM 1960, organizes several “second chance” job fairs each year, in which employers know the applicants have criminal records. Job losses in the oil industry have affected the demand from offshore rigs, with fewer jobs being offered at the events than during oil’s more robust periods, Fallbrook Pastor Mike Pendor said.

“The recent struggles in the oil sector has made it much more difficult for everyone and especially difficult for those with a criminal record,”
Pendor said.

Despite the energy sector struggles, experts said the health care industry continued to see growth in 2016. The industry grew by 24,500 jobs from December 2014 to October 2016 across the Greater Houston area, according to the Texas Workforce Commission.

At least nine emergency rooms and urgent care facilities have opened in recent years in Spring and Klein, along with two hospitals that opened in 2016.

Real estate, construction steady

Overall, the Greater Houston area real estate market is enduring the downturn well, according to GHP, which reports more than 26,000 single-family homes are to be built in the region in 2017.

Steve Owen is a Realtor at Better Homes and Gardens and has lived and worked in Spring for 29 years. He said three years ago the Spring and Klein real estate market was a boon in “historic proportions,” but it slowed dramatically when the downturn hit.

Yet, the market’s slowdown has affected Spring and Klein less than other Houston-area markets, because houses priced at and above $500,000 were the ones most affected, he said. Spring and Klein have fewer houses in that price bracket compared with other parts of Houston, such as The Woodlands.

“From that standpoint, that one particular segment of the market that has been a drag on a lot of the area real estate markets hasn’t had as much of an impact on the Spring and Klein area,” he said.

Spring, Klein endure oil and gas downturnAverage home sales prices actually increased slightly from $282,000 to $283,000 in a three-year span from 2014 through November 2016, according to data compiled by Owen for three ZIP codes: 77389, 77388 and 77379.

Additionally, the completion of Grand Parkway segments F-1, F-2 and G in early 2016 has assisted the local real estate market, Owen said.

“Having the Grand Parkway allows people to live and broaden where they can work,” he said.

Meanwhile, construction on the east side of Houston, which has had an unprecedented rise in construction jobs due to petrochemical growth, is now slowing down, Gilmer said, with the scale tipping to the west side. There, construction is on the verge of an upswing.

The west side of Houston is home to more upstream oil and gas activities, such as drilling and engineering, Gilmer said. The bulk of the job losses during the downturn have come from upstream oil and gas jobs, reaching as high as 80,000 job losses in the past 24 months. But now activity will shift back up in favor of the west side of Houston, such as in areas like Spring and Klein.

“You see apartment construction and some office construction up in following the Grand Parkway out there,” Gilmer said. “That’s where the city grows. That’s where we should be building apartments and houses.”

Owen said the ExxonMobil campus development in Springwoods Village has attracted homebuyers, with employees continuing to come to the area.

Rep. Kevin Brady, R-The Woodlands, agrees the development of the ExxonMobil campus has helped Spring and Klein weather the downturn.

“The diversification of the local economy, along with the opening of the ExxonMobil campus, definitely aided our communities in surviving the most recent downturn in energy prices,” Brady said.

Recovery signs

The worst of the oil bust may be over, and a projected 2017 recovery is gaining traction, according to GHP.

Factors that determine the end of a downturn include the price of oil, the number of drilling oil rigs and job growth.

Gilmer said $60 per barrel of crude oil is the price at which drilling can be profitable for oil companies. The price has climbed to more than $50 from a 2016 low of $30.

From December 2014 to October 2016, the number of manufacturing jobs, such as those related to the oil industry, decreased by more than 30,000. One in  3 workers in the oil equipment manufacturing field lost their jobs during the downturn, according to the Texas Workforce Commission.Spring, Klein endure oil and gas downturn

Meanwhile, in December, GHP reported the number of drilling rigs nationwide reached 593 in November from record low of 404 in mid-May, which could translate to a possible 30,000 jobs created in the Houston area in 2017, Gilmer said.

“[The recovery is] just at a slower speed than we want it to be,” said Myeshi Briley, Spring Klein Chamber of Commerce president. “Southwestern Energy and ExxonMobil—it’s not like they closed their doors. When the economy goes back to full swing, it’ll probably be better than when [the downturn] started.”