There is an emerging economic boom in Ohio thanks to the Utica Shale. However, while the region is beginning to see increased economic activity, one thing is clearly lacking: a coinciding increase in hiring. That has many Ohioans wondering where all the promised jobs are going.
That has simply not been the case, as employment is up just 1.4% in those same counties. That number is virtually on par with the 1.3% growth experienced by the rest of the state. The problem, according to the study, is that “[employment] growth associated with exploration and early stage production may have been captured by out-of-state workers that already possessed the necessary skills and training.” The good news, according to the study: “Employment growth should accompany the increased scale and scope of shale activities in the coming years.”
What’s likely happened is that workers from the dry gas drilling area of the Marcellus in Pennsylvania simply crossed state lines looking for work when drilling in that state slowed down. Pennsylvania initially saw the same thing when the Marcellus began to emerge a few years ago; its highways were filled with Oklahoma and Texas license plates. Because of the skills and training required, companies have been forced to source employees from out of the area.
That being said, at some point the trickle-down effect will be seen through employment growth in the state. There are massive amounts of infrastructure being built with much more needed in the coming years. As infrastructure comes on line it will help fuel the growth of production budgets at exploration and production companies. In fact, the year ahead should be very promising.
For example, Chesapeake Energy Corporation (NYSE:CHK) said it expects to see its production growth accelerate as two new third-party natural gas processing plants come on line. The company is devoting 11% of its more than $6 billion capital budget to the region. It’s not alone in its plans to grow in the Utica.
Arguably the best positioned Utica driller is Gulfport Energy Corporation (NASDAQ:GPOR). It sees development of the Utica being a catalyst for both production and reserve growth, and its basically building the company’s future around this one play. Gulfport Energy Corporation (NASDAQ:GPOR) is planning to spend up to $426 million of its $512 million capital budget on the Utica this year. That’s a huge bet for a company of its size.
The final thing to consider is the increased midstream capacity that Chesapeake mentioned. Both Markwest Energy Partners LP (NYSE:MWE) and Dominion Resources, Inc. (NYSE:D) have processing and pipeline capacity coming on line over the next few years. This will get the gas and oil to market centers and drive profitability for the drillers, which will encourage more capital to be deployed in the region.
Marathon Petroleum Corp (NYSE:MPC) now has Utica crude oil being moved by truck, train, and barge to its refineries in the area. This is weening those refineries off of expensive foreign imports and improving profits. As production increases, expect to see more projects being announced to take advantage of Ohio’s resources. That will mean jobs, and if North Dakota and Texas are any indication, it could mean a lot of them.
Ohio might be wondering when those promised jobs from the Utica Shale boom will finally arrive. I’d venture to say that the Utica Shale would ask for a little more patience as these things take time to ramp up. While the employment growth will likely never exceed the already sky-high expectations, at some point the trickle-down effect will be felt as it has been in so many other areas affected by the shale boom.
The article Employment Growth Here Could Be Right Around the Corner originally appeared on Fool.com.
Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Dominion Resources (NYSE:D). The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy.
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