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The Worse Things Get For You, The Better They Get For Wall Street
The Worse Things Get For You, The Better They Get For Wall Street
On October 2 the BLS reported absolutely atrocious employment data, with virtually no job growth other than the phantom jobs added by the fantastically wrong Birth/Death adjustment for all those new businesses springing up around the country. The MSM couldn’t even spin it in a positive manner, as the previous two months of lies were adjusted significantly downward. What a shocker. At the beginning of that day the Dow stood at 16,250 and had been in a downward trend for a couple months as the global economy has been clearly weakening. The immediate rational reaction to the horrible news was a 250 point plunge down to the 16,000 level. But by the end of the day the market had finished up over 200 points, as this terrible news was immediately interpreted as good news for the market, because the Federal Reserve will never ever increase interest rates again.
Over the next three weeks, the economic data has continued to deteriorate, corporate earnings have been crashing, and both Europe and China are experiencing continuing and deepening economic declines. The big swinging dicks on Wall Street have programmed their HFT computers to buy, buy, buy. The worse the data, the bigger the gains. The market has soared by 1,600 points since the low on October 2. A 10% surge based upon lousy economic info, as the economy is either in recession or headed into recession, is irrational, ridiculous, and warped, just like our financial system. This is what happens when crony capitalism takes root like a foul weed and is bankrolled by a central bank that cares only for Wall Street, while throwing Main Street under the bus.
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The Real Long Term Threat To The Oil & Gas Industry
The Real Long Term Threat To The Oil & Gas Industry
As oil prices continue their downward slide, most investors and firms are understandably eyeing prices, revenues, and exploration costs nervously. All that makes sense, as there is a good chance some oil firms will face liquidity crunches and restructuring over the next year. In the longer term though, there is another specter that could be equally damaging to O&G firms – a shortage of skilled labor.
During the 2008 Recession, many manufacturing firms cut way back on labor and costs everywhere they could, as demand plummeted and customers started asking for lower prices. Fast forward a few years though, and demand has returned. What has not returned are many of the skilled laborers that were instrumental to the manufacturing industry’s success. Many of the industry’s best workers moved on to other fields or retired in the intervening years since the Recession. As a result, manufactures complain frequently about a lack of available skilled labor. The same thing could happen in the O&G industry.
Related: UK Determined To Realize Its Fracking Dreams
Oil and gas executives already lament the lack of proper training being done by colleges and universities for entry level employees. The exodus from the industry is only going to exacerbate that problem. Every field in the O&G space from geologists on down, is seeing layoffs and cut-backs. In the short term, these actions might be unavoidable. But if the downturn continues for more than a year or so, many of these workers may move on to new fields. If that happens, the industry could find that those workers are lost for good.
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Layoffs Surge As Oil Price Outlook Remains Sober
Layoffs Surge As Oil Price Outlook Remains Sober
Lately the leaders of some of the world’s biggest energy companies have been saying oil prices will remain depressed for some time – perhaps for the next five years – and now they’ve decided to cut their costs in the most painful way possible: massive job cuts.
Royal Dutch Shell announced July 30 that it expects to eliminate 6,500 positions. The announcement came the same day it reported that earnings in the second quarter were $3.4 billion, 33 percent lower than the $5.1 billion it made during the same period of 2014.
The same day, the British utility Centrica said it plans to cut fully 6,000 jobs and reduce the size of its division for producing oil and gas. The day before, Chevron Corp. of the United States expected to eliminate 1,500 positions.
Related: The Broken Payment Model That Costs The Oil Industry Millions
And as oil producers struggle to rein in spending elsewhere in their operations, the pain is being shared by the oil service companies they rely on. The Italian energy contractor Saipem, for example, says it plans to cut 8,800 jobs in two years.
“We have to be resilient in a world where oil prices remain low for some time,” Shell CEO Ben van Beurden said in the statement. “These are challenging times for the industry, and we are responding with urgency and determination.”
It may be too early to determine whether the price of oil, which began falling a year ago, was now forcing the energy industry to go beyond cutting fat and is now gouging into the very sinew of its operations, but it’s clear that they’re convinced that other economies simply weren’t enough to keep themselves afloat.
Related: Greenpeace Going All Out To Stop Shell Drilling In The Arctic
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The Layoffs Return: Energy Giants Chevron, Saipem To Fire Over 10,000 Workers
The Layoffs Return: Energy Giants Chevron, Saipem To Fire Over 10,000 Workers
In the beginning of 2015 the biggest threat to the economy as a result of the collapse in oil prices, both in the US and worldwide, was the surge in layoffs among highly-paid energy sector job. This was confirmed in April when we showed the Challenger layoffs data for the energy-heavy state of Texas, and the energy sector in general where the 37,811 job cuts in Q1 were some 3,900% higher than a year earlier.
Then in Q2, after the price of oil staged a substantial rebound of about 50% from the year to date lows in the $40’s, energy-related layoffs trickled to a halt as corporations hoped the worst is behind them, and as a result would merely bide their time before redeploying their workforce toward exploration and production.
Alas, this was not meant to be, and as the events of the last month have shown, oil has resumed its downward slide. And, as expected, so have layoffs.
Overnight, US energy major Chevron announced it will cut 1,500 jobs globally “as the company aims to reduce internal costs in multiple operating units and the corporate center.” According to Rigzone, “the San Ramon, Calif.-based energy company will cut 950 positions in Houston, 500 positions in San Ramon and 50 positions internationally.”
Chevron is cutting jobs due to the current market environment and is “focused on increasing efficiency, reducing costs and focusing on work that directly supports business priorities,” Chevron spokesperson Melissa Ritchie said in an email to Rigzone.
Chevron will be cutting 1,500 employee positions across the 24 groups that comprise the corporate center; 270 of the positions are existing vacancies that will not be filled. Additionally, 600 staff augmentation contractor positions will be cut in the corporate center.
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Thousands Of Layoffs Coming After Buffett Merges Heinz With Kraft, Creating 5th Largest Food Company In The World
Thousands Of Layoffs Coming After Buffett Merges Heinz With Kraft, Creating 5th Largest Food Company In The World
Another day, another mega-M&A deal taking advantage of abnormally low bond rates, this time however not involving biotechs or a specialty pharma seeking to purchase a debt-free balance sheet, but one involving the Oracle of Omaha himself, and his Heinz investment, which will merge with Kraft Foods whose market cap was over $40 billion this morning on the news of the merger, and create the third largest food and beverage company in the US, and 5th largest in the world.
And while the resulting company will certainly be an unprecedented food giant, one which leaves the US food industry even more concentrated, here is the rationale behind the deal and the punchline for American workers: “significant synergy opportunities.” Translation: thousands of layoffs imminent.
Details from the press release:
H.J. Heinz Company And Kraft Foods Group Sign Definitive Merger Agreement To Form The Kraft Heinz Company Combination Creates Unparalleled Portfolio of Powerful and Iconic Brands
- Merger will create the 3rd largest food and beverage company in North America and the 5th largest food and beverage company in the world.
- Combined company to be named The Kraft Heinz Company and to be co-headquartered in Pittsburgh and the Chicago area.
- The new company will have revenues of approximately $28 billion with eight $1+ billion brands and five brands between $500 million-$1 billion.
- Stock and cash transaction, with Kraft shareholders to receive a special cash dividend of $16.50 per share upon closing and stock in the combined company representing a 49% stake in the new company.
- Berkshire Hathaway and 3G Capital will invest an additional $10 billion in The Kraft Heinz Company; existing Heinz shareholders will collectively own 51% of the new company.
- Significant synergy opportunities with strong platform for organic growth in North America, as well as global expansion, by combining Kraft’s brands with Heinz’s international platform.
- The Kraft Heinz Company is fully committed to maintaining an investment grade rating; Company plans to maintain Kraft’s current dividend per share, which is expected to increase over time
Full press release:
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100,000 Layoffs and Counting: Is this the New Normal?
100,000 Layoffs and Counting: Is this the New Normal?
This time a year ago, the oil industry’s biggest problem was finding a way to deal with the “retirement tsunami” about to crash down on it as older oilfield workers hung up their cork boots to enjoy freedom-55. Now, with oil prices still in the doldrums, many of those same workers are lucky to be hanging onto their jobs, while others have been booted from the payroll as an ugly wave of layoffs takes hold.
One of the worst-affected areas is the Canadian oil sands, where a higher per-barrel cost of production than conventional sources has oil companies scrambling to cut capital expenditures and in several cases, put long-term projects on ice.
On Thursday one of the region’s big players, Husky Energy, announced that about 1,000 construction workers employed by a contractor at its Sunrise oilsands project, would be issued pink slips. The bad news for the workers came a day after Husky said that it had started to produce from the $3.2 billion, steam-assisted gravity drainage (SAGD) Sunrise operation, which it co-owns with BP.
Related: Oil Limits Could Undermine Our Entire Economic System
The layoffs by Husky followed Suncor’s decision in January to cut 1,000 employees and Royal Dutch’s Shell’s announcement that it will shed close to 10 percent of the workforce at its Albian sands project – around 300 workers.
The Canadian Association of Oilwell Drilling Contractors, which closely tracks drilling activity, said in February that up to 23,000 jobs could be lost as the number of rigs fall. Since the price started dropping last September, about 13,000 positions in the Alberta natural resources sector, mostly oil and gas, have been eliminated, according to Statistics Canada.
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Oil Plunge Hits Office Market, But “So Far” No Apocalypse
Oil Plunge Hits Office Market, But “So Far” No Apocalypse
“Here in Houston a number of projects have been canceled. Engineers are put on ‘hold.’ There have been some contract engineers laid off, and hiring has been suspended. Everyone is waiting for the other shoe to drop.” That’s how an engineer in the energy sector saw it. And it captured the mood.
So the sky isn’t quite falling on the Houston property market. Not yet. With 18.4 million sq. ft. of office space under construction, the epicenter of the US energy industry is far ahead of number two, New York City with 7.6 million sq. ft. under construction. Dallas is number four with 7.5 million sq. ft. Much of the growth in Texas over the last few years has been spawned by the “shale revolution.”
But the layoff announcements in the oil-and-gas sector are hailing down on the industry.
Weatherford International – headquartered in Houston – announced last week, after reporting a quarterly loss of $475 million, that it was axing 5,000 employees, or 8.9% of its global workforce, to save $350 million per year. Yesterday, Halliburton announced 6,400 job cuts, on top of the 1,000 announced in December. Baker Hughes, which is being acquired by Halliburton, announced 7,000 job cuts. In January, Schlumberger announced 9,000 layoffs. This brings the layoff announcements of the four largest oil-field services companies to 28,400. It’s all about cash flow, now that pricing chaos has swept over the once flush industry.
Oil majors and smaller companies have chimed in with their own layoffs. Privately held companies might quietly proceed with cuts. And many of these folks would have needed some office space.
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Another 5,000 Victims Of The Plunge In Oil Prices
Another 5,000 Victims Of The Plunge In Oil Prices
Yet another energy company is struggling to save money in the face of unexpectedly low oil prices. Weatherford International, one of the world’s largest oilfield services company, will cut 9 percent of its global workforce in the next two months to save more than $350 million a year.
The vast majority of the layoffs – 85 percent, or 4,250 workers – will be felt in the United States and Western Europe. The company, which has operations in more than 100 countries, now has about 56,000 employees. Weatherford also will offer voluntary buyouts to certain eligible employees to reduce its workforce further.
“We will focus the entire organization on ensuring we are cash-flow positive in 2015,” the Swiss-based company’s CEO Bernard J. Duroc-Danner said in a statement late Wednesday. “This means that for every dollar of revenue we lose due to reduced activity and pricing, we will make up for it in cost, capital expenditure and working capital reductions.”
Because of the drop in oil prices, oil companies and ancillary services like Weatherford are losing business. Nevertheless, Duroc-Danner said Weatherford will keep its eye on ensuring a positive cash flow throughout 2015. Last year it began selling off subsidiaries and cutting costs in other ways, raising about $1.8 billion in cash, most of it to pay down debt.
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16% of oil and gas firms thinking of job cuts: Mercer survey
Canadian industry harder hit because production and exploration more sensitive to falling price
A survey of oil and gas companies throughout North America indicates a major pullback underway in the industry as they cut capital spending and reduce hiring in response to low oil prices.
The survey, by human resources company Mercer, indicates 44 per cent plan to cut back on capital spending and 32 per cent will reduce their search for new talent for their companies in 2015.
The results of the survey are a sharp contrast to a year ago in the oil and gas industry, when finding employees with the right skills was a priority and 66 per cent of firms said they were on the lookout for new hires.
“Most organizations in one way or another are looking for reductions in expenses,” Graham Dodd, Mercer’s energy and natural resources energy leader for Canada, told CBC News.
He said firms are moving from thinking about cuts to putting them into place as they “adjust to the new reality of $45 oil.”
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Oil Price Collapse Hurting Some More Than Others
Oil Price Collapse Hurting Some More Than Others
U.S. oil and gas rig counts dropped to their lowest level in over four years, falling by an additional 74 units for the week ending on January 16. The lower count provides fresh evidence that low oil prices are forcing drillers to pare back operations and slash spending.
While that may soon begin to cut into actual production figures, a new Wood Mackenzie report finds a lot of nuance in the oil patch, painting a complex picture of what to expect in 2015. The report identifies several trends beyond the simple narrative that low prices will force a cutback in drilling.
First, Wood Mackenzie estimates that at $40 per barrel, many producing wellscould be shut in. In fact, about 1.5 million barrels per day of production would be “cash negative” – meaning it wouldn’t even make sense to continue pumping at the most marginal wells, which tend to have extremely low-output. These “stripper wells,” which only produce 15 barrels of oil per day or less, have high costs given their level of production.
Related: Oil Industry Withdraws From High Cost Areas
Wells producing such a tiny flow of oil may seem like a nonissue, but withhundreds of thousands of them dotting the country, they collectively account for about one-tenth of the nation’s production. As these wells become unprofitable, production should start declining.
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On to Plan B as Oil Work Stalls in Texas
On to Plan B as Oil Work Stalls in Texas
MIDLAND, Tex. — With oil prices plummeting by more than 50 percent since June, the gleeful mood of recent years has turned glum here in West Texas as the frenzy of shale oil drilling has come to a screeching halt.
Every day, oil companies are decommissioning rigs and announcing layoffs. Small companies that lease equipment have fallen behind in their payments.
In response, businesses and workers are bracing for the worst. A Mexican restaurant has started a Sunday brunch to expand its revenues beyond dinner. A Mercedes dealer, anticipating reduced demand, is prepared to emphasize repairs and sales of used cars. And some well-off oil company managers are cutting back at home, rethinking their vacation plans and cutting the hours of their housemaids and gardeners.
Dexter Allred, the general manager of a local oil field service company, began farming alfalfa hay on the side some years ago in the event that oil prices declined and work dried up. He was taking a cue from his grandfather, Homer Alf Swinson, an oil field mechanic, who opened a coin-operated carwash in 1968 — just in case.
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Suncor to cut 1,000 jobs in response to low oil prices
Energy firm to cut $1B from capital spending, delay work on some projects
Oilsands giant Suncor Energy says it will cut approximately 1,000 jobs and reduce its 2015 spending plans in response to lower oil prices.
The job cuts will primarily affect contract workers, but will also involve a reduction in employee positions, according to Suncor’s announcement, made in a press release today. The Calgary-based company also said it will implement a hiring freeze “for roles that are not critical to operations and safety.”
“Cost management has been an ongoing focus, with successful efforts to reduce both capital and operating costs well underway before the decline in oil prices,” said Suncor CEO Steve Williams in the press release.
“However, in today’s low crude price environment, it’s essential we accelerate this work. Today’s spending reductions are consistent with our commitment to spend within our means and maintain a strong balance sheet.”
Suncor says it will cut $1 billion from its capital spending program, and reduce sustainable operating expenses by between $600 million and $800 million over two years. It will defer expansion of its MacKay River project in Alberta’s oilsands, in addition to delaying work on the White Rose Extension oilfield off the coast of Newfoundland and Labrador.
Suncor said its Fort Hills oilsands project will continue as planned, as well as work on the Hebron oil field located approximately 350 kilometres southeast of St. John’s.
