U.S. Oil Jobs under pressure

Nothing is ever black and white, earlier this week I read an article about the lack of legal workers making it hard for oil companies to find adequate labor and they were having to leave equipment sitting idle. Many are forced to hire undocumented workers willing to do jobs others won’t and face fines and even jail time.

…On the flip side of the coin, now we have a great article by Irina Slav about companies laying people off to appease shareholders and meet promised return goals. Oil prices are stagnant, rig counts are up…and down… depending on which report you read.

Production is up, exports are up, new pipelines are flowing, banks are investing, companies are employing new technologies and methods…. so what is the problem? More efficient drilling methods, new technology, uncompleted wells, oil and gas prices? A 5% decline doesn’t seem drastic, unless you are one of the 5% who find themselves unemployed.

Production certainly doesn’t appear to be slowing down and is expected to continue rising in the Permian Basin for the foreseeable future.

image courtesy of https://www.oilprice.com

The Single Biggest Threat To U.S. Oil Jobs

By Irina Slav – Oct 16, 2019, 6:00 PM CDT

When earlier this year Whiting Petroleum announced it would cut a third of its workforce, the news did not make a huge splash as it was lost among other cost-cutting efforts in the industry. But when earlier this month Halliburton said it was cutting 650 jobs, the signal became clearer: the U.S. shale boom is slowing and businesses are preparing for a bad-case scenario where the slowdown extends.

Indeed, the U.S. oil and gas industry is bleeding jobs. Reuters’ John Kemp reports, citing official data, that the oil and gas support segment had shed 14,000 jobs between October last year and August this year. That’s a 5-percent decline and while it might not be worrying in itself, combined with other data from the industry, it does suggest a slowdown is in motion.

New drilling rig additions between September 2018 and August 2019, Kemp wrote, fell by as much as 20 percent, or 176, according to data from Baker Hughes. Part of that may be better drilling efficiency, of course, but there is also the issue of drilled but uncompleted wells, or DUCs, that the EIA includes in its production forecasts as they can be completed and out into production relatively quickly.

These forecasts, according to industry insiders, could be misleading precisely because of the DUCs. In an energy industry survey by the Federal Reserve of Dallas, half of the respondents from the oil industry said the EIA had been overestimating the number of drilled but uncompleted wells in the Permian. What’s more, a quarter of these respondents said the overestimation was significant, S&P Global Platts reported in late September. Some oil executives blamed this on the loose definition of a DUC.

Kemp, for his part, notes the slowdown in completions as well. Earlier this year, he wrote, completions of wells drilled last year kept the ball rolling and production growing. Yet recently the number of completions has started falling as has the number of DUCs, which declined by 11 percent between January and August.

In April this year, Pioneer Resources and Laredo Petroleum announced plans for job cuts. The pressure then came mostly from shareholders who insisted on getting their promised returns despite the decline in oil prices. Now, with prices stuck between $50 and $60 a barrel, additional pressure is mounting on the industry.

Production is still growing, though. At the end of September, the EIA reported Texas had added 40,000 bpd during the month and had topped 5 million bpd for the first time ever. In North Dakota, production spiked to 1.41 million bpd, also a record-high.

For this month, the EIA expects production in the Permian alone to add another 63,000 bpd in production and while later data based on actual reported output may be lower, chances are oil production in the star play will continue rising over the observable future. However, the workforce employed in this production and oil production in other shale plays may continue to shrink unless price trends change and the change lasts for more than a couple of days. There are investors to make happy and bank loans to repay, all while the outlook for global oil demand becomes gloomier.

By Irina Slav for Oilprice.com

Share This Post On:

Leave a Reply