The Fuse

Report: U.S. Hit Hardest in Global Oil and Gas Industry Layoffs

by R. Kress | June 23, 2015

Since oil prices began to drop in fall 2014, there have been countless headlines about how layoffs have impacted oil and gas producers around the country. A new report from energy recruiting firm Swift Worldwide Resources found that the layoff tally has likely exceeded 150,000 jobs around the globe.

According to the Houston Chronicle, Swift finds that the United States has seen “the fastest and steepest decline” in oil and gas jobs, with layoffs focused in the oilfield services sector. Companies including Schlumberger, Halliburton, Baker Hughes, and Weatherford have eliminated roughly 50,000 jobs in the the last few months alone.

In contrast to the United States, drilling activity in Saudi Arabia is at a 20-year high, although associated job growth has been fairly low.

While the impact of the price decline on company balance sheets has been extensively documented, the burden of low oil prices on the industry’s individual workers is more nebulous. One thing is clear—for many oil and gas workers including Rachel*, a drilling fluids engineer based in Midland, Texas, praying for oil prices to rise is part of daily life.

Unlike thousands of others in her field, Rachel is lucky enough to still have a job. After a week’s mandatory furlough, she will return to her position working on a rig owned by one of the world’s largest international oil and gas companies. That said, even the manner in which her current furlough was executed reflects the current state of uncertainty in her industry.

“It was optional at first,” she said, “But then, within a week, it became mandatory. It started in May and by the end of June, everyone had to take [unpaid leave].”

Over the past six months, oil and gas workers around the country have seen their jobs vanish—starting with contractors and so-called roughnecks, but gradually the layoffs have worked their way up through the corporate hierarchy. “The prices remained low for so long that companies were forced to start reducing their staff headcount as a counter measure,” Janette Marx, Chief Operating Officer of Swift Worldwide Resources told the Fuse in an email. “The most important advice that we can give applicants is to be flexible, which may mean looking for placement overseas.”

Rachel believes that the only reason she has managed to hold on to her job is that she’s a younger, cheaper employee than many of her peers. She was still in her pre-job training when oil hit record lows in the $40-per barrel range and the pace of layoffs began to accelerate. “When things were bad around January, everyone was worried about where they were going to go next,” she said. “We were holding onto our phones all day asking, ‘Is my boss going to lay me off next?’”

But as Bill Kasko—President and CEO of Dallas-based oil and gas staffing agency Frontline Source Group—told The Fuse, skilled, white collar workers like Rachel have less to fear than the grim hiring statistics would suggest. “A lot of people think the whole [oil and gas] industry is collapsing. That’s not what’s going on. Is it the same robust engine that it was a year ago? No, but it’s happened before and these companies know what they need to do to tighten the belt,” he said.

Kasko draws a very clear distinction between white collar workers and blue collar workers in the industry. Whereas white collar workers are seeing some hiring paralysis and may be facing less job security and fewer opportunities to move up the corporate ladder, blue collar workers are far more likely to face the prospect of full unemployment.

“The rig count is down 60 percent. That says it all. When you have a 60 percent decrease in the rig count, you’re going to see rig workers get laid off.”

Unlike many rig workers, Rachel has options that extend beyond the worksite as a direct hire. That means she can simply move to another rig owned by the company that employs her. “On a lot of the rigs, they say the rig is ‘getting stacked’—that they’re taking it back to the rig yard and they’re just going store it until [the market] gets better. The rig crews and the roughnecks are the ones who get sent home when their rigs get stacked because they work for the rig but not the company. I can go to any rig my company works on, so if my rig gets stacked there’s an option to go to another.”

However, because the industry is far broader than just the operations at the rig site, Kasko thinks that the layoff numbers can be misleading.

“The oil industry is so wide: You still have to take the oil and transport it. You have your midstream companies, your processing plants, your refineries, your storage processes. Those are all still going. And oil demand is still there,” Kasko explained, demonstrating that there is far more to the oil and gas industry than the workers at the rig site. “It’s not the Exxons of the world that we’re worried about. It’s the 100,000 people that support Exxon to do what Exxon does at the end of the day.”

But for workers on all levels in the oil and gas industry, there’s an innate understanding that oil and gas is a cyclical business that ultimately will rebound.

“As long as we’re still driving cars and burning fossil fuels, there’s still going to be a demand and a need. It’s not something that’s going to go away,” Kasko said, also indicating that recent national hiring figures and the coming election year indicate a brighter future. “It’s a 12 to 18 month cycle and the economy is a factor. It’s not something that will resolve itself overnight… We just hope it doesn’t last beyond 12 months. It will probably be the first of next year before we see any substantial uptick in white collar hiring.”

Marx at Swift Worldwide Resources echoed this sentiment. “The market is cyclical. It has undergone similar drops before, and recovered. It will recover this time as well, probably stronger than before. Once producers start new projects, jobs will come back to the industry… Prices will eventually recover and when they do, the industry will be underinvested in top talent that is needed. The key for players in the domestic market is to be invested early enough to capture the recovery and come out of it strong.”

For Rachel, who estimates that some 50 percent of her coworkers have been laid off since January, it’s a tense waiting game. “I guess I don’t really have any reason by assurance that it will get better…It’s cyclical and I’m just waiting for the next part of the cycle. If you look at past trends in the oil industry, it’s fallen before but it’s come back—how quickly is the biggest question.”

In the meantime, Rachel remains grateful to be employed while understanding the strange position she is in to see her coworkers lose their jobs while her friends outside of the industry rejoice over low gas prices. “I’ll look on Facebook, for example, and people will post about how they filled their car for $20. And I think: 20,000 people just got laid off.”