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More Job Losses Coming to U.S. Shale
More Job Losses Coming to U.S. Shale
With the recently concluded nuclear deal between Iran and the P5+1 countries, oil prices have already started heading downward on sentiments that Iran’s crude oil supply would further contribute to the already rising global supply glut. The economic crisis in Greece, OPEC’s high production levels and China’s market turmoil have created more pressure on oil prices, making a price rebound look highly unlikely in the near future.
So, with the prices of both Brent and WTI moving towards $50 per barrel, the short to medium-term outlook for oil remains mostly bearish. This is bad news for the U.S. shale sector which is already dealing with rising debt and the ever-increasing risk of default.
A recent Bloomberg report stated that U.S. driller’s debts stood at $235 billion at the end of first quarter of 2015, which is quite worrying. Does this mean that the U.S. oil sector is likely to witness a lot more layoffs than we have seen so far? Surprisingly, a recent IHS study had revealed that the U.S. shale sector has been boosting job creation in addition to supporting around 1.7 million jobs in U.S.
All this as the overall unemployment rate in U.S. has been declining since previous years. But with rising negative sentiment pertaining to oil prices, is U.S. the shale sector prepared to face one of its biggest tests yet? Will the industry be able to sustain another long period of low oil prices or will it once again resort to trimming its workforce?
Related: Shale Industry May Need A Complete Rethink To Survive
Low oil prices will most likely result in more job losses
Since the oil price collapse of last year, we have seen how oil field services and drilling companies have slashed thousands of jobs in order to reduce costs and cut their operational spending. Some of the major oilfield companies like Schlumberger, Halliburton and Weatherford have already announced close to 20,000 layoffs as of February 2015.
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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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