American Oil and Gas Reporter - August 2016 - 41

bought out their father, who passed later
that year. With Monnie serving as president
and John as vice president, they continued
to grow Liberty and launched Capitol
Well Service in 2006.
Careful management enabled Liberty
to hang on during the mid-1980s downturn,
Sparkman recalls, but the most recent
downturn includes its own set of challenges. He notes that the boom of the
late 1970s and early '80s lasted six-seven
years, but the most recent uptrend lasted
roughly twice that long, with some exceptions related to the global recession
of 2008-09 and the onset of an extended
period of sagging U.S. natural gas prices.
"The most recent boom lasted long
enough that many people got into the
business, or started or expanded businesses," Sparkman says. "There are a lot
more competitors now in most areas, and
all of them are trying to get a piece of the
same pie. The problem is that the pie is
so much smaller at the moment than what
it was a few years ago."
The Permian Basin is weathering the
storm better than most regions. In fact,
Baker Hughes reported in late July that
the Permian accounted for 36 percent of
the total U.S. rig count. "Unconventional
oil plays are driving that activity," Sparkman relates. "Plays such as the Wolfcamp
and Spraberry hold huge reserves and
are proving economic to develop, relative
to other unconventional reservoirs."
Planning For The Upturn
Sooner or later, the downcycle will
turn into an upcycle. The challenge for
equipment and service providers is to
navigate the bottom of the cycle while
remaining prepared to capitalize on the
upturn when it comes, Sparkman notes.
"We have seen downturns before and
every one of them had ended the same
way: in an upturn," he says. "The upturn
is coming. We just have to keep our heads
up and chip away until it gets here."
For Sparkman, survival has always
been about planning ahead, which his
forebears did during the 1980s, and he

and his staff continue to do today, he says.
"I had been anticipating what happened
beginning in late 2014 for about five
years beforehand," he says from Liberty's
offices on U.S. 385 on the northern edge
of Odessa. "I knew activity was going to
slow at some point. It had to. The United
States was producing more and more oil
and natural gas. The gap between global
oil supply and demand was getting wider,
and I knew we were going to get to a
downturn sooner or later. To be honest, I
thought it would have hit about three
years ago."
Preparing for depressed activity levels
included working to ensure that new
equipment was paid for and that the company retained an ample supply of cash.
Liberty employs 20 and Capitol about
15. Thus far, the company has been able
to avoid layoffs.
"I have not had to lay off anybody
and I am not planning on laying off anybody," Sparkman says. "We are optimistic
the industry already has made it through
the worst of it."
Despite the price decline, the costs
of doing business have not fallen nearly
as much as revenues, he points out. That
is partly the result of large operators applying increasingly stringent API standards and adopting additional requirements initially applied to offshore drilling
and production.
"We have blowout preventers that I
have to recertify at a substantial cost that
previously met requirements, and we are
not getting any more for renting the BOPs
than we were before the downturn. It takes
renting a BOP every single day for months
to recoup those dollars," Sparkman says,
noting that Capitol Oil Well Service had
two of its four rigs running in mid-July.
Liberty also is in the process of purchasing five more BOPs to satisfy one
major operator's requirements, he says,
and is awaiting an audit to ensure the
company meets the specifications to continue working for the operator.
"Our fishing tool services business is
still good, but so much concerning BOPs

comes from the offshore environment,"
Sparkman says. "The same BOP standards
required in the Gulf of Mexico are being
mandated now for onshore operations in
West Texas, and it is completely unnecessary. I know some machine shop guys
who are about to pull their hair out as
they work to meet the new standards.
Some regulations may be impossible for
them to keep up with. Some equipment
simply cannot be made to meet the new
standards. It will mean buying brand new
equipment."
Still, the prospect of improving prices
is helping as some operators that previously
had drilled and cased Permian wells without completing them at least start considering ramping up activity to take advantage of lower hydraulic fracturing
costs while they still can, Sparkman
offers. That could translate into more
business for Liberty for completions done
with pipe, he adds.
"When the recovery happens, it could
happen pretty quickly. We want to be
sure we are ready when the demand
comes back," he says.
Despite current conditions, the oil and
gas industry will continue to offer new
generations opportunities to advance free
enterprise, Sparkman insists, as he looks
ahead to his own children's futures. He
and his wife, Jill, have three children:
Taylor, 23; Brooke 21; and Victoria, 13.
"I think the oil field is the final frontier
where a guy can go out and learn something well, and start his own company,"
Sparkman says. "To me, oil and gas represents one of the last sectors of true entrepreneurship. You can learn a trade and
start your own business. When things are
good, they are really good. The sky is
the limit for a young person entering the
business who is motivated, ambitious and
talented."
Exhibitor applications are still available
on the PBIOS website at www.pboilshow.org. For information on exhibiting
or attending the 2016 show, visit the
website or call the PBIOS office at 432367-1112.
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AUGUST 2016 41

American Oil and Gas Reporter - August 2016

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