Despite Optimism, Oil Firms Keep Cutting Jobs
July 22 2016 - 02:21PM
Dow Jones News
By Lynn Cook and Alison Sider
Energy companies continued to cut thousands of jobs during the
second quarter, even though many chief executives are now voicing
optimism that the oil market crash is ending and a rebound in
drilling is afoot.
Although the heads of Halliburton Co., Schlumberger Ltd. and
other major firms forecast higher crude prices and a return to U.S.
shale fields when discussing earnings this week, those companies
and others disclosed another 15,000 industry layoffs.
Among the recent job cuts were 8,000 employees from
Schlumberger, the world's largest oil-field service company, and
5,000 from its rival Halliburton. FMC Technologies, which makes
offshore oil equipment, cut 1,000 workers in the spring and summer.
ConocoPhillips, one of the biggest U.S. oil producers, confirmed
another 1,000 employees will be let go by the end of September.
Further bloodletting in the oil patch has brought the number of
global energy jobs lost during this downturn to more than 385,000
people, with the bulk of the latest cuts coming in the U.S. and
Canada, according to data from Houston-based consultancy Graves
& Co.
Paal Kibsgaard, the chief executive of Schlumberger,
characterized the state of the market this way: The worst may be
over for the industry, but that doesn't mean the impact of the oil
bust is fully in the rearview mirror.
"We aren't expecting a uniform V-shaped recovery here," Mr.
Kibsgaard told investors Friday. Schlumberger, which helps
oil-and-gas producers tap new wells and coax more fuel out of old
ones, has clients from Oklahoma to Oman, but in the last two years
it has reduced its world-wide workforce by 50,000 people.
Halliburton Chief Executive Dave Lesar said Wednesday that his
company's customers, oil and gas companies, believe the clouds are
lifting and "they are getting back to business."
"There is a growing survivor mentality out there, and you can't
underestimate the positive change in attitude that we are seeing in
our North American customers," he said. "There is a spring in their
step that I didn't see earlier in the year."
Still, Halliburton continued to pare its ranks in the second
quarter. Its workforce has now been cut by about 40% since 2014,
when its staffing levels were highest, and now stands at over
50,000 employees.
The big disconnect coloring oil's recovery is that oil producers
need lower costs to drill profitably at current crude prices, which
are hovering around $45 a barrel. But service companies have to
start raising their prices again to bring rigs and fracking
equipment out of storage and rehire experienced crews to run
them.
That will require an even higher crude price in order for oil
operations to break even.
"The heart of what both Schlumberger and Halliburton are trying
to message to their customer base is the severity of this downturn.
In many instances these service companies are going through rounds
five, six, seven of head count reductions over last two years,"
said Byron Pope, an analyst at energy investment bank Tudor,
Pickering, Holt & Co.
"It feeds on itself," he added. "If those oilfield services
costs end up being inflationary, that break even [oil price] level
you need as an operator goes up."
ConocoPhillips, a prolific producer in the U.S. and Canada,
confirmed further job cuts on Thursday. It is making targeted
layoffs in specific areas that aren't projected to be economic for
several years, including certain portions of Alberta's oil sands,
according to a person familiar with the matter.
The company has already cut 3,400 jobs, or roughly 18% of
employees, since September 2014 when the oil bust first set in,
according to filings with regulators. The new cuts amount to
another 6% of its global workforce, spokesman Daren Beaudo
said.
"We have taken several steps as a company to adapt to lower and
more volatile prices and strengthen our position coming out of the
downturn," he said.
Write to Lynn Cook at lynn.cook@wsj.com and Alison Sider at
alison.sider@wsj.com
(END) Dow Jones Newswires
July 22, 2016 14:06 ET (18:06 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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