Name any energy company and it’s going through what virtually all are doing these days—reorganizing efforts to cut costs and save money.
Gulfport Energy in Oklahoma City, a firm that announced this week a 13 percent reduction in its workforce isn’t alone. Chaparral Energy will be down to one drilling rig in 2020. Chesapeake Energy is struggling with historic low prices of its shares in trading on the New York Stock Exchange.
As Joshua Mann, a senior reporter with the Houston Business Journal reported this week, Halliburton Company’s headcount reductions this year were driven by “realities of the energy market.”
The Houston-based oil field services giant shed about 8 percent of its North American workforce in the second quarter. Then, in the third quarter, it reduced the headcount of its Rocky Mountain arm by about 650 people in Colorado, Wyoming, New Mexico and North Dakota.
The North American oil and gas market is going through what CFO Lance Loeffler called a “total reorganization of the value chain.”
“We don’t want to stack crews today that aren’t earning their cost of capital. That’s not what we’re in business to do,” Loeffler said. “We’re doing that today because that is the stark reality of what pricing has done. That is what it has forced us to do.”
There is an effort within the company to find ways to do things differently and to add some of those crews back into the market, Loeffler said.
Some of the headcount reductions also come from an effort to reduce costs, Loeffler said.
“How do you do that? Sometimes that means less people, sometimes it means the application of more technology,” Loeffler said. “We’re never going to have a completely robotic pressure pumping crew, but are there ways that we can work more efficiently?”
As to whether the trend of layoffs will continue, Loeffler said that is still to be determined.
“It feels like spending will be down next year. We’re planning for all of the above,” Loeffler said. “I’m more focussed on watching the impact of the things we can control.”
During the year, Halliburton restructured its organization in North America to remove several layers of management. And the company put away oil field equipment and will keep it in storage until it sees better returns, CEO Jeff Miller said on the company’s July 22 earnings conference call.
The backstory
The oil and gas industry has faced contractions in recent months, with 23 percent of Texas companies in that sector reporting third-quarter layoffs, according to a survey by the Dallas Federal Reserve. That has been especially marked in Texas-based oil field services companies, two-thirds of which reported lower headcounts.
Houston upstream and OFS companies have faced other kinds of problems, too. Of the 21 Houston companies that had received delisting warnings from their various stock exchanges during the first eight months of the year, 12 of them were either oil and gas producers or direct service providers to such companies, according to public filings with the U.S. Securities and Exchange Commission as of August.
On top of that, oil and gas companies generally are experiencing another wave of bankruptcies. There have been 50 bankruptcies across oil and gas upstream, services and midstream businesses through the first nine months of 2019, according to data from Haynes and Boone LLP’s latest bankruptcy report. That’s up from 35 during the same period of 2018, according to the report.
Source: Houston Business Journal
