Analysts Worry That Booming Permian Basin Could Be Headed For Next Bust

As West Texas continues to reap the rewards of a humming oil industry, some experts are warning that harder times could be on the horizon.

The domestic energy sector rebounded surprisingly well after a 2014 crash in oil prices jolted the industry and prompted widespread layoffs — and nowhere, Bloomberg reports, adjusted as well as the Permian Basin.

Fracking companies flocked to the massive shale formation in West Texas in recent years, where an estimated 70 billion barrels of crude remain underground and an ongoing oil boom is reminiscent of times when crude prices were twice as high.

The number of oil rigs in operations doubled since last spring and output is expected to set a record next month, Bloomberg notes. Real estate prices are also rapidly escalating in Midland, located in the heart of the Permian.

The boom could mean that West Texas is now so productive that companies can make money at current prices -- about $50 per barrel -- or it could mean that trouble is on the way.

Local observers long accustomed to the boom-and-bust cycle of the oil business pointed to numerous warnings signs, from a shortage of skilled labor to rising equipment prices to changing company habits.

Already, some producers are shifting to less productive drilling sites in an effort to keep oil flowing. Others, meanwhile, are curbing or postponing their plans for new drilling.

“We’re over-capitalized, we’re over-drilling and, if prices don’t rise, we might be facing a double dip in drilling," Steve Pruett, the chief executive of Midland oil and gas company Elevation Resources, told Bloomberg.