Shale client lost, firm lays off 200

CEO in Conway cites wreck

Correction: Sam McFadin, chief executive officer of M&M Environmental Group, said there have been 49 truck rollover accidents in the Fayetteville Shale involving oilfield services companies working for Southwestern Energy. This story incorrectly attributed all the rollover accidents to M&M.

M&M Environmental Group, an oil-field services company based in Conway, laid off 200 employees Friday after losing a contract with Fayetteville Shale driller Southwestern Energy Co.

Sam McFadin, chief executive officer of M&M Environmental Group, said he had to terminate most of his workforce of roughly 250.

He said the layoffs, which were announced about 9 a.m., were effective immediately and that remaining employees will be offered transfers to company offices in Oklahoma. Some of the employees will work for another vendor in Arkansas.

McFadin said the termination of the contract with Southwestern stemmed from a truck accident last week involving one of M&M's drivers.

"The publicity from the incident was too much for [Southwestern] to bear," he said.

In an email, Southwestern Energy spokesman Christina Fowler declined to explain why the contract with M&M was terminated.

"Southwestern Energy does not take lightly the decision to part ways with any vendor, including M&M, and when it becomes necessary to make that decision, [Southwestern] believes that the reasons for it are better left between the parties," Fowler's email said.

Southwestern, the main driller in the Fayetteville Shale, had already announced plans to reduce spending in the Fayetteville Shale this year by 40 percent.

In the early hours of March 11, an M&M Environmental truck hauling drill cuttings overturned and spilled its contents at the U.S. 64 bypass near Vilonia. Drill cuttings are a muddy byproduct from a natural gas or oil well.

The driver said he fell asleep and the truck left the eastbound lanes and crashed through the median barrier. The truck overturned in the westbound roadway and came to a stop on the shoulder of the highway, according to a report by the Arkansas Department of Environmental Quality.

"Upon rolling over the impact of the dump bed with the roadway caused the safety latches to become loosened, and allowed the loading door to open releasing the drill cuttings," the report said.

Drill cuttings are pieces of rock that are brought up when a borehole is created when drilling a well. As the cuttings are brought to the surface with drilling mud, they are coated with the mud, which contains petroleum products such as diesel or another distillate.

The Arkansas Department of Environmental Quality report said M&M Environmental cleaned up the spill and that all contaminated material was taken to a waste disposal facility in Damascus belonging to M&M Environmental.

In an email, department spokesman Katherine Benenati said the cleanup was completed March 13 and the spill was not referred to the department's enforcement division.

The department's records indicate the spill was the only incident in the last five years involving M&M Environmental, she said.

McFadin said he was told by a "third party source" Tuesday afternoon that the company's contract with Southwestern Energy was being terminated.

"They didn't even have the decency to give me a call," he said.

M&M Environmental was founded in 2010 and had as many as 300 employees at one point, McFadin said. The company pared back to 250 employees when natural-gas exploration in Arkansas started to slow, he said.

Drilling in the Fayetteville Shale has dropped off in the past three years as a result of continued low natural-gas prices.

Companies operating in north-central Arkansas have been moving their rigs to other shale formations that contain oil and natural-gas liquids, such as ethane and butane, because they are more profitable than the dry gas abundant in the Fayetteville Shale formation.

Southwestern Energy; XTO Energy Inc., a subsidiary of Exxon Mobil Corp.; and BHP Billiton Ltd. have reduced the number of drilling rigs they operate in the shale as a result of the slowdown.

Energy companies across the country are cutting capital expenditures in response to the current round of weak commodity prices, driven by an oversupplied market.

Activity in the Fayetteville Shale began to wane in 2012 when natural-gas prices plummeted below $2 per million British thermal units for a while and stayed below $4. When drilling peaked in Arkansas in 2008, natural-gas prices were between $6 and $10 per 1 million Btu on the New York Mercantile Exchange.

Business on 03/21/2015

Upcoming Events