Reposted with permission from the Hobbs News Sun.


Lea’s rig count

November average 26 active

Low – 19 in August 2020

Peak – 62 in October 2019

County GRT is driven by the Rig Count. Monthly GRT in the current fiscal year is running 61% of the prior fiscal year monthly average. It runs two months behind. September business activity would be received in November.

Lea’s oil production

Peak – March 2020 – 19,809,307

Bottom – May 2020 – 14,556,921 – 36% drop

As of Sept 20 – 17,898,625 23% increase from bottom

Lea Is still #1 in oil Production in every month since January 2020

Monthly Oil and gas production revenue has rebounded from a low of $923,543 in July 2020 to $3,625,144 in November 2020. Only back to 67% of previous monthly record of $5,355,595 (April 2020).. Note: There is a 3 month lag between production and tax revenue, ie. Tax on September production will be received by the County in December.

Lea County leads the nation in oil production and tops the Permian Basin in rig count.

In spite of it all — the unrelenting pandemic, the oil and gas bust, high unemployment and severe restrictions — Lea County has maintained its national lead in oil production every month of 2020.

Then, last week, oilfield services company Baker Hughes and data analytics firm Enverus reported 30 rigs in Lea County, the highest number of rigs in the Permian Basin, including counties in both New Mexico and Texas. Eddy County comes in second with 28 rigs.

Lea County Finance Director Chip Low keeps track of rig counts and oil and gas production because both those data points affect the county’s budget.

“We’re still No. 1 and have been all through 2020,” Low said of oil production. “I have sources to support all that data.”

Oil production in Lea County peaked in March at 19,809,307 barrels, then bottomed out in May with 14,556,921 barrels, a 36% drop, Low said.

By September, production had risen back up to 17,898,625 barrels, a 23% increase from the bottom.

The county’s gross receipts tax revenue is driven by the rig count, while other revenue is driven by the amount of oil production and the price of oil. That’s in addition to the property taxes with which the county government normally pays its bills.

Lea County Manager Mike Gallagher said Lea County has created an environment that promotes industry and helps create jobs.

“Governments, whether it’s local or state, don’t really create jobs. They just, really, can impact the environment in which a business or industry operates,” Gallagher said. “In Lea County, I believe, we created an environment that is business friendly, not only with some of the lowest tax rates in the entire state but also with the investments the county has made into the infrastructure.”

Turning to county revenue, Low said, “Monthly oil and gas production revenue has rebounded from a low of $923,543 in July 2020 to $3,625,144 in November 2020.”

The West Texas Intermediate price of oil bottomed in April, three months before the July revenue bottom, with a monthly average of around $15 per barrel, including a one-day dip into negative territory. Currently, the WTI price is around $45 per barrel.

Meanwhile, the unemployment rate in Lea County hit 16.6% in July, but has been steadily declining each month since, reported at 11.5% for October.

The November oil production tax revenue is just 67% of the monthly record of $5,355,595, received in April, Low said, noting there is a three-month lag between production and tax revenue. For example, the county will receive tax on September production in December.

With rig counts driving GRT revenue, Low said November’s average was 26 active rigs following an August low of 19. The rig count increased to 30 by the end of the month. That compares to a peak in October 2019 of 62 rigs.

Noting that GRT revenue runs two months behind business activity, Low said, “Monthly GRT in the current fiscal year is running 61% of the prior fiscal year monthly average.” November business activity GRT revenue will be received in January. Fiscal years run from July to June of the following calendar year.

According to Baker Hughes, which has been reporting rig counts since 1944, the entire nation added 10 rigs in the short week ending the day before Thanksgiving, three of which were added in New Mexico, all in Lea County.

Throughout the U.S., on Nov. 25 there were 320 rigs, 10 more than the previous week but still significantly fewer than the 802 rigs in operation a year ago.

There were no rig count declines over the week in any of the producing states.

Other counties producing oil in the Permian Basin, following Lea and Eddy counties’ top two rig counts were Texas counties of Midland with 20 rigs, Martin with 14 rigs, Howard with 13 rigs and Reeves with 12 rigs.

Gallagher concluded Lea County commissioners have created an environment to help the oil and gas industry flourish.

“Governments can either help facilitate it or we can help prevent it,” Gallagher said. “Sometimes we have to strike a balance and I think, in the county, we have a really good balance.”

Curtis Wynne may be contacted at