The Permian Basin is America’s largest inland producing region for oil and gas. After unbridled growth during the fracturing boom, the region now hosts the last major shale play in the U.S. with growing oil production, according to figures from the U.S. Energy Information Agency. But other major oil-producing regions have seen production dropping.

In addition, signs of a looming industry downturn are beginning to appear on the Permian horizon, with concerns for long-term business sustainability and the effects of a significant downturn on the regional economy. One local oil and gas plant manufacturer believes it has the solution for a manageable transition, but it isn’t one companies can adopt at the last minute.

Paul Morrow, CEO of Agile Process Solutions LLC and a managing director of Morrow Energy Inc., has been serving the oil and gas industry from the Permian Basin for 30 years and has weathered several boom-and-bust cycles in the industry and the region during that time. After reading a book titled “Making Character First” (by Tom Hill, 2010, Character First Publishing) and giving a copy to everyone in the company, he had some major realizations about business structure vs. surrounding market factors and how another possible “bust” might affect the local economy given the history of Permian Basin businesses in the oil and gas industry.

“When there is a boom here [in the Permian Basin], companies spring up virtually overnight,” Morrow said. “It has an almost immediate effect on the local economy when rig counts increase and workers start pouring in. But many of these companies are very opportunistic in their approach to business. In their rush for profit, they often overlook some of the most fundamental aspects of long-term business viability. Their operations are almost purely market-driven, and with the next significant downturn their business implodes.

“That has a profound effect on our local economies when everyone starts leaving the area because it creates a vacuum that affects everyone here,” he added. “It seems like the Permian Basin has been, historically, particularly vulnerable to this phenomenon. The problem is, you don’t just fix a business overnight, especially when it involves your company culture. If we haven’t already learned this from past downturns and implemented the appropriate changes in our business structures, it might be too late.”

Morrow said that after reading the book, his family’s ability to prosper even during tough times made a lot more sense, but given the basin’s history with “just get-‘er-done” business structures, he now questions whether local businesses are equipped to readily withstand what is turning out to be a rough downturn. He may indeed have valid reason to be concerned. According to Rye Druzin of the Midland Reporter-Telegram, in an article dated May 10, 2015, “[Over the last year] commodity prices have decreased by half, tens of thousands of jobs have been lost worldwide, and oil companies have had first-quarter losses and a hemorrhaging of cash reserves. … The numbers indicate a stark picture. Texas, which has had monthly growth in its labor force for seven straight years, saw 12,500 jobs leave the state in March, the highest number on record, according to the U.S. Bureau of Labor Statistics. The last time that the labor force contracted was in March 2007 when 1,400 people left Texas’ workforce.”

Optimism remains

Despite this bleak forecast, however, most in the Permian Basin oil and gas sector remain optimistic. “The American oil industry, which has reversed its fortunes in the past decade, has emerged nimbler and equipped to be more efficient,” Druzin said in the article. “Years of booms and busts have left experienced executives wary of the good times and prepared for the bad. As oil prices plummeted faster than the industry expected, companies responded by slashing budgets and driving down costs [and trimming the workforce]…. The centrality of the Permian Basin in the American oil industry is proven by the numbers.”

Morrow is one of those “experienced executives” about which Druzin wrote. And even if Druzin’s comment regarding changes in American oil industry business practice holds true for Permian Basin businesses, Morrow believes there is much more to becoming resilient to market trends than merely reacting by slashing budgets and people. People, as it happens, are the very last component of his business he would drop and are his primary source of business investment aside from hard assets.

“At Agile Process Solutions, as with all Morrow Energy enterprises, we operate a values-based management system that puts our relationships with clients and employees before everything else and which emphasizes personal integrity, character and virtuous business over numbers-crunching,” Morrow said. “We have always operated this way, and we are still here after watching many of our allies and competitors go the way of the wind during previous market downturns.

“And we have not just survived but thrived,” he continued. “As I have come to learn, the very business principles we have esteemed so highly over the years are the very ones that have made other businesses in other industries household names, companies like Rubbermaid, Cummins Engine, Chick-fil-A, Tyson and Four Seasons Hotels. These are principles that apply to organizations of all sizes in all cultures and work to ensure and prolong business prosperity even in the most uncertain market environments.”

Asked what his management style had to do with a continued downturn in oil and gas prospects, Morrow answered, “On a national scale, probably not so much. But on a local scale, particularly here in the Permian, we may have a unique opportunity to thrive as a regional community vs. imploding if national and global market factors continue to take a toll on American oil and gas. But that may depend in whole or in part upon area oil and gas suppliers and producers implementing more values-based business systems and practices, even if it means less short-term profits. That has kept Morrow Energy [formerly SouthTex Treaters, now owned by Kinder Morgan] alive and doing very well, even better in the long run than we originally hoped. ”

Leap of faith

When asked how he makes those hard choices, Morrow admits that sometimes it becomes more a matter of faith born out of belief born out of experience. But ultimately there is a leap of faith involved based on the belief that “right makes might.”

“It is really the difference between being an opportunistic scavenger interested only in short-term profit vs. making a long-term commitment to Permian Basin prosperity, being a team player and managing your business with some understanding of its direct impact, good or bad, on other people and businesses in the area that have nothing to do with oil and gas,” he said. “We have learned firsthand over the years that these concepts are not mere psychobabble. If you operate in a socially conscious manner, if you are responsible to the community in which you live and work, and you put some effort into its micro-culture, then you will last a lot longer as a business, you’ll have more options at any given time and the people who operate your business as well as your customers may indeed save your business when things get rough. The problem is, it takes time to build or rebuild an organization around these principles so that a business culture can take root and thrive, and that culture is really the only way you know if any of these principles are working at all. Sometimes a business can’t be fixed, and you have to start over.”

Morrow speaks of things that, while demonstrated, are undoubtedly difficult, if not impossible, to quantify or deliberately manipulate. But hardening the Permian Basin oil and gas sector against possible future trends and realities that could “bankrupt” economies has nothing to do with reactionary methods after the fact and everything to do with deliberately structuring area oil and gas businesses to focus on employee cultivation, client relationships, personal integrity and putting virtuous business before short-term profit.

“You eventually learn by experience that what seems like sacrifice at the time, when executed for the right reasons, becomes the very path to greater prosperity than you would have had otherwise,” Morrow said. “Values-based management can put your business destiny on a path almost completely set apart from market factors—like anything good, it just takes a little time and commitment to build your company around it.”