Threatened oilfield bust is costing thousands of jobs

One of the most painful busts in the history of crude oil happened just six years ago when a sharp price drop cost 200,000 roughnecks, almost half the entire workforce, their jobs.

And now, the spread of the coronavirus coupled with an oil-price war between Russia and Saudi Arabia threatens to devastate the oil services industry and its workers once again as Bloomberg reported.

Tens of thousands of Texans are being laid off across the state in places like the Permian Basin shale fields in west Texas as companies shut down their drilling rigs, according to Ryan Sitton, a state oil and gas regulator.

At OK Energy Today reported recently, at least 11,00 oilfield jobs in Oklahoma have been lost in the past year.

Announcements are starting to trickle in. Drilling service company Canary LLC cut 43 workers last week. Recoil Oilfield Services laid off 50 workers after the water-transfer company lost all of its work with shale giant EOG Resources Inc. But the biggest blow so far came from Halliburton Co., the world’s dominant fracking-services provider, which said this week it would furlough 3,500 workers at its Houston headquarters.

The cutbacks follow a precipitous drop in the price of West Texas Intermediate, the U.S. benchmark crude, falling to as low as $20.06 this week from $52.05 just one month ago.

While workers in just about every industry are threatened by the economic slowdown, few are more at risk than those in the oilpatch. The Midland-Odessa region of West Texas, where Occidental Petroleum Corp. and Parsley Energy Inc. have dominated, could be decimated, according to a report from the Brookings Institutions. More than 40% of Midland’s workforce is in high-risk industries, mostly oil and gas, the highest of any region in the U.S., it said. Overall, the services workforce today stands at about 316,000, down about 30% from its peak in 2014.

“It’s pretty overwhelming,” said Kendrick Trinidad, a 25-year-old frack supervisor for Recoil Oilfield Services who was put on “standby” until further notice. He remembers his last dismissal, in the downturn of 2015, while still having to make his $1,100 monthly truck payment. “It is uncharted territory, because you just never know.”

The shrinking workforce is the direct result of a torrent of cuts in capital spending from U.S. explorers, some $12.6 billion so far. All told, nearly two-thirds of the $100 billion in global spending cuts could come in U.S. shale fields, according to Rystad Energy. For the contractors, no service business will feel that pain more than the one that blasts water, sand and chemicals underground to release trapped hydrocarbons — also known as hydraulic fracturing.

And this time around, the financial wreckage could permanently sink parts of an industry that were able to stay afloat half a decade ago thanks to bank loans.

”There’s definitely blood in the water,” said Dan Eberhart, chief executive officer of the Denver-based Canary. “The weakest oil and gas companies, oilfield service companies and banks with heavy energy exposure might submerge beneath the waves before the end of the cycle never to surface again.”

Halliburton, which generates most of its sales in North America, is expected to see its earnings before interest, taxes, depreciation and amortization fall by 40% this year to $2.2 billion, Scott Gruber, an analyst at Citigroup Inc., said Thursday in a note to investors. And that’s expected to drop another 30% next year.

Source: Bloomberg