Energy companies brace for job cuts as oil prices fall
December 28, 2014
The plunging price of oil has created a dilemma for major energy companies as they cut costs and prepare for what experts say will be inevitable job reductions, with midlevel administrators considered far more vulnerable than engineers and other highly skilled workers.
A handful of companies have announced personnel cuts for next year, but many still haven’t provided details on 2015 budgets or workforce plans.
At a time when crude oil is trading at barely half its 2014 peak, some workers inevitably face job losses, said Bill Herbert, an analyst at Simmons & Co.
“The industry is going through Darwinian adjustment,” Herbert said. “The pressures of the marketplace will dictate that these companies adjust their businesses accordingly. The easiest way to do that, frankly, is to reduce your head count.”
Models from the Federal Reserve Bank of Dallas indicate that if crude oil remains around $55 per barrel, Texas could lose 128,000 direct and indirect energy jobs by mid-2015, said Michael Plante, a senior research economist at the Dallas Fed.
BP, the London-based international integrated oil company, already has said it will cut an unspecified number of midlevel supervisors in its oil production and refining businesses, as well as some back-office jobs.
Halliburton CEO Dave Lesar hinted at job cuts in an email telling employees that “2015 is going to be a tough year.” A week earlier, the company — which counts on oil producers as customers for its oilfield services — announced 1,000 layoffs in the Eastern Hemisphere.
Meanwhile, big independent producers including Marathon, ConocoPhillips and Apache say they’ll cut their 2015 capital budgets. While those budgets don’t include salaries, the figures are a sign of a more conservative approach. “The downturn happened so fast, companies are just now starting to react to it and put plans in place to deal with it,” said Bruce Peterson, managing director of the Houston office of Korn Ferry, which specialize in recruiting senior-level employees.
Adam Berk, a Houston-based human capital partner at the consulting firm EY, said the oilfield jobs outlook for next year is unclear.
“There will be some tightening of the belt,” he said. “I don’t think anyone can feel completely safe. I don’t think there’s necessarily a need to panic, either.”
When companies cut spending, they try to minimize effects on their operations.
Looking after people
In the energy business, that could be bad news for back-office and support-staff employees whose work isn’t directly involved in the technical fields of exploration, drilling and production.
“What companies will do is perform an evaluation, look at low-performing individuals within support-staff roles, and those people will be the ones who’ll be targeted to first exit the organization,” said Peterson.
Employees who work for oilfield services companies could be at risk of layoffs first, followed by those in the exploration and production sector.
Keith Wolf, managing director of Houston-based staffing firm Murray Resources, said oil companies may rely more on contract workers rather than permanent hires to give themselves flexibility if oil prices continue to fluctuate.
Employees with technical skills and deep experience, however, probably can feel fairly secure in their jobs.