Oil companies still slashing jobs to cut costs

Spanish Market: Crude oil, Natural gas
01/05/15

Layoffs in the oil sector are mounting, as companies scramble to cuts costs in the wake of lower crude prices.

Oil services companies were the first to be hit. Oilfield services firm Schlumberger is slashing 20,000 jobs — 11,000 more than previously planned. Halliburton is cutting 9,000, with more on the way this quarter. Halliburton takeover target Baker Hughes is eliminating 10,500 jobs, while Weatherford International is reducing by 8,000, including more than 3,000 in North America.

Schlumberger chief executive Paal Kibsgaard has described as "almost unprecendented" the pace and magnitude of the reduction in drilling activity, particularly in North America. "We have to go back to the mid-1980s to find anything similar."

Job cuts at the majors have been less severe, at least so far.

BP on 28 April said it reduced its headcount by 800 in the first quarter, largely because of the new price environment. That is on top of the 3,500 reduction in its headcount over a two-year period ending 31 December 2014.

But BP in December announced plans to incur $1bn worth of restructuring charges through the end of 2015. BP took $433mn of that charge in the fourth quarter and another $215mn in the first quarter. BP has not said how many job cuts that will entail, but oil services staffing firm Swift Worldwide Resources chief executive Tobias Read estimated the $1bn restructuring will equate to about 10,000 jobs lost.

ExxonMobil has not commented on layoffs.

Overall, Swift estimates more than 120,000 jobs will be lost worldwide.

The job cuts are not surprising. Total chief executive Patrick Pouyanne told participants at the IHS CERA energy conference last week that since the beginning of the year, he has not heard of many new projects being sanctioned industrywide.

"We are all on the same page," Pouyanne said. "2015 will be quite low profile in terms of sanctioning of new projects."

The slowdown in the US energy sector helped bring US economic growth to a near-halt in the first quarter. The US economy grew at an annual rate of only 0.2pc in the first quarter, the US Bureau of Economic Analysis reported. Investment in US mining , which includes oil and gas wells, dropped nearly 49pc in the first quarter compared with the fourth quarter of 2014, the bureau reported.

US outplacement consultancy Challenger, Gray & Christmas estimated job cuts totaling 47,610 at US-based firms in the first quarter were directly attributable to lower oil prices.

"The drop in the price of oil has taken a significant toll on oil field services, energy providers, pipelines and related manufacturing," firm chief executive John Challenger said.

In Alberta's oil sands, where producers are struggling to remain profitable at today's price levels, operators as of 2 April had announced reductions totaling 4,500, the Canadian Association of Petroleum Producers reports. Overall, the Canadian Association of Oilwell Drilling Contractors estimates 23,000 jobs could be at risk.

Shell is cutting 300 jobs there, US independent ConocoPhillips 200 jobs. ConocoPhillips hinted at steeper cuts globally, when it announced plans in April to lower operating costs by $1bn by 2016.

Other producers, including US independents Occidental, Continental Resources, Pioneer Natural Resources and Hess, plan to weather the downturn with their staffs largely intact. They hope to avoid the kind of talent drain that has plagued the industry after previous down cycles.

Occidental is sending more of its junior engineers out to the field to replace contractors. Continental Resources chief executive Harold Hamm says he shed 10pc of his workers in an earlier downturn and does not plan to make such cuts again..

"We may not drill any wells, but we are not laying off anyone," Hamm said.

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