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2014-12-27 19:30:00

OIL JOBS CUTTING

OIL JOBS CUTTING

U.S. oil and gas companies have been an engine of growth through much of an otherwise lackluster economic expansion, providing steady employment, solid wages and fierce competition for workers across wide swaths of the country.

Now, after a roughly 50% plunge in oil prices, exploration and production companies are cutting capital budgets, service companies are weighing layoffs and nonenergy firms that popped up to support the industry are bracing for a protracted slowdown.

One company caught in the industry downturn is Hercules Offshore Inc. The Houston-based firm is laying off 324 employees, roughly 15% of its workforce, because oil companies aren't renewing contracts for its offshore drilling rigs in the Gulf of Mexico while crude prices are depressed.

"It's been breathtaking," said Jim Noe, executive vice president of Hercules, which was founded in 2004. "We've never seen this glut of supply and dislocation in oil markets. So we're not surprised to see a significant decline in demand for our services."

Lower oil prices are still expected to provide an overall boost to the U.S. economy. Consumers are spending less on gasoline and more at retailers and restaurants, while many companies are benefiting from cheaper costs for energy and raw materials—giving a boost to hiring outside the energy sector. Money that would have gone to imported oil—the U.S. remains a net importer—will remain at home.

The U.S. Energy Information Administration said the average U.S. household is expected to spend about $550 less on gasoline next year than in 2014. And HSBC expects lower gasoline prices will boost consumer spending enough to add 0.4 percentage point to the U.S. growth rate for gross domestic product next year, a sizable bump for an economy that has struggled to sustain momentum.

Still, for the energy industry, the belt-tightening is starting to crimp what had been one of the brightest patches of the labor market.

Within the narrow set of sectors most closely related to oil and gas extraction—including oil-field services, pipeline construction and equipment manufacturing—employment jumped by almost 50% to more than 779,000 jobs from the end of the recession through October, compared with a 7% gain across all job sectors, according to Labor Department data.

Wages in such industries also saw a marked increase, the data showed. Average earnings for workers in oil and gas extraction, for example, climbed nearly 23% to more than $1,700 a week over that period, not adjusting for inflation. That compares with a 13% increase to $848 for all workers.

Tom Runiewicz, a U.S. industry economist at IHS Global Insight, forecasts companies providing support services to oil and gas companies could lose 40,000 jobs by the end of 2015, about 9% of the category's total, if oil stays around $56 a barrel through the second quarter of next year. Equipment manufacturers could shed 5,000 to 6,000 jobs, or about 6% of total employment for such companies.

These aren't big numbers in an economy where total nonfarm payrolls surpassed 140 million last month. But the jobs generally offer good wages and create demand for other services.

"It's a bigger hit than losing service jobs in the hotel sector," said Mark Mills, a senior fellow at the Manhattan Institute who has studied the nation's energy-related employment boom.

Mr. Mills, in a study this year , said shale-oil and -gas production has been the nation's biggest single creator of solid, middle-class jobs across the economy since the recession ended in mid-2009. By his estimate, a total of 10 million jobs are associated with the oil and gas industry in fields as wide-ranging as transportation, construction, education, health care and food services.

While many companies say it is too early to notice the impact from lower oil and gas prices, concerns are spreading and companies are planning for a lengthy period of leaner times.

"Frack service companies that would not return my phone calls because we are a small operator are now blowing up my phone to go to lunch, a hockey game just to find some work for their crews," said Rob Helbing, vice president of operations at Trek Resources Inc., an oil and gas producer with operations in Texas, Oklahoma, Louisiana and Kansas. "Most service companies and [oil and gas] operators will try their best to get through the Christmas season. But just sit back and watch the layoffs that will follow."

Even companies that haven't yet seen any direct effect and expect to fully weather any industry downturn are wary.

"If people aren't worried, they are ignorant," said Jim Arthaud, chief executive of MBI Energy Services. The firm, based in Belfield, N.D., employs about 2,000 workers—a roughly fivefold increase from five years ago—and operates a fleet of more than 500 trucks hauling oil, sand, water and other raw materials for fracking companies.

Business and rates are holding steady for MBI, and the company isn't worried about having to scale back. But if oil prices stay low, "somebody has to start cutting people," Mr. Arthaud said.

An extended downturn could hit hardest in states such as North Dakota and Texas, which have benefited the most from hydraulic fracturing, or fracking, technology that allows oil to be pumped out of shale formations.

"While the rest of the country looks to benefit from cheap oil, Texas could be headed for recession," Michael Feroli, chief U.S. economist at J.P. Morgan Chase & Co., said in a recent note to clients. Mr. Feroli calculates that more than 90% of U.S. oil-production growth in the past five years has been in North Dakota and Texas.

During an energy-price collapse in 1986, the Lone Star state suffered rising unemployment, falling home prices and later a banking crisis. "We think Texas will, at the least, have a rough 2015 ahead," he said.

North Dakota is showing possible signs of a drop-off in activity. Within the state, the drilling-rig count fell by 10 to 183 from September through Dec. 12. Oil prices are one among several significant forces driving the slowdown, the North Dakota Industrial Commission's Department of Mineral Resources said this month. "Rig count in the Williston Basin is set to fall rapidly during the first quarter of 2015," the state said, referring to the geologic formation that is rich in oil and covers the western portion of the state.

Already, many exploration and production companies are demanding savings from contractors. "We need cost cuts right away or we're going to slow down or we're going to quit doing things," Chip Johnson, president and chief executive of Houston-based Carrizo Oil & Gas Inc., told investors this month. "We're not in a real hurry to drill and frack a lot of wells until we see where the service-cost numbers go."

Some service companies are trying to find a silver lining in what could be a slowdown in activity and softening of the labor market. Indeed, companies in the oil and gas industry for years have lamented the difficulty of finding skilled workers, rising wages and short tenure of many employees who are quick to hop between firms.

"In my opinion, in a way it's good because it will get the companies more efficient," said Tyler Goodman, president of Borsheim Crane Service, of Williston, N.D. "Having to do everything yesterday costs a lot of money. People will quit making $150,000 a year for $25,000-a-year skills."

wsj.com

Tags: U.S., OIL, GAS, PRICES,

Chronicle:

OIL JOBS CUTTING
November, 20, 09:05:00

INDIA'S GAS WILL UP

REUTERS - India’s natural gas consumption is expected to rise to 70 billion cubic metres (bcm) by 2022 and 100 bcm by 2030, according to a government think tank and the Oxford Institute of Energy Studies, up from 50 bcm now. India burns just 7 percent of what top user the United States consumes in a year with about a quarter of India’s population.

OIL JOBS CUTTING
November, 20, 09:00:00

NORWAY SELLS OIL & GAS

Norway, which relies on oil and gas for about a fifth of economic output, would be less vulnerable to declining crude prices without its fund investing in the industry, the central bank said Thursday. The divestment would mark the second major step in scrubbing the world’s biggest wealth fund of climate risk, after it sold most of its coal stocks.

OIL JOBS CUTTING
November, 20, 08:55:00

OIL PRICES UP

WSJ - Light, sweet crude for December delivery rose $1.41, or 2.6%, to $56.55 a barrel on the New York Mercantile Exchange, snapping a three-session losing streak. Brent, the global benchmark, advanced $1.36, or 2.2%, to $62.72 a barrel.

OIL JOBS CUTTING
November, 20, 08:50:00

U.S. RIGS UP 8 TO 915

U.S. Rig Count is up 327 rigs from last year's count of 588, with oil rigs up 267, gas rigs up 61, and miscellaneous rigs down 1 to 1. Canada Rig Count is up 24 rigs from last year's count of 184, with oil rigs up 9 and gas rigs up 15.

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