The collapse in oil prices has so far claimed more than 200,000 jobs worldwide. Leading the bloodbath are the oilfield service giants; Schlumberger SLB +0.00% has axed more than 20,000 oilfield service workers, about 15% of its staff. Rival Halliburton HAL -1.56% is cutting 18,000, Weatherford International 14,000, and Baker Hughes BHI -1.85% 13,000. Among the big integrated oil companies Royal Dutch Shell appears to have the highest total with 7,000 laid off.
And the pain has been felt much farther afield. Equipment giant Caterpillar CAT +1.41% has cut 5,000, Siemens 13,000. Makers of steel drilling pipe have been hit, as have miners of sand used in fracking and the manufacturers of rail cars used to transport crude oil.
The data behind the 200,000 tally has been painstakingly collected over the past year by staff at Oklahoma City-basedContinental Resources CLR +0.00%, whose CEO Harold Hamm has made a point of not laying off any of his own direct employees. ExxonMobil is among the only other oil companies to not cut any employees so far. They are in the distinct minority.
“Companies are reacting aggressively to shorten the duration of the downturn,” says Steve Morse, a consultant with headhunting giant Russell Reynolds Associates. “These cuts are as dramatic as we’ve seen in this industry ever.”
The industry bloodbath has coincided with the mothballing of more than 1,100 drilling rigs and a halving of capital spending. And there’s good reason to believe the pain isn’t close to over yet. Oil markets are still in glut. The Saudis have shown no indication that they will cut production. Iraq and Iran are set to grow their output even at current prices. According to a report from the Energy Aspects consultancy, “There are some suggestions oilfield crews could be sent home after Thanksgiving, as producers have given up on this year.”
Furthermore, the finances of exploration and production companies continue to erode. Earlier in the year private equity investors opened their wallets to help overleveraged drillers prop up their balance sheets. Distressed debt investors bought up billions more in junk bonds. But as share prices and bond prices have continued to plunge, the appetite to throw more good money after bad has dried up. As the value of reserves have plummeted, banks are slashing the amounts they are willing to lend. And the situation will get even worse in early 2016, as the oil price hedges that companies put in place back in 2014 to lock in higher returns expire.
Barring an oil price snapback, 2016 will be a year of restructurings, asset sales, and more layoffs. As Schlumberger CEO Paal Kibsgaard said on recent call with investors: “The likely recovery in our activity levels now seems to be a 2017 event.”
So what are laid off workers to think? Is there any hope of finding a new job in this environment?
There are some bright spots, says Steve Morse of Russell Reynolds Associates. The “downstream” or refining sector has been booming, benefitting from access to cheap oil. “It’s the opposite of the upstream,” says Morse. “We are helping clients in the downstream attract functional talent” that in recent years had been attracted to the more glamorous upstream companies.
And there’s also still plenty of opportunities for talented younger executives. “The companies we work with recall the 1980s” when oil prices collapsed and “the majors stopped hiring at the university level for eight years,” says Morse. And they are not going to repeat that hiring moratorium because they saw the longterm damage it did to their workforce. Two decades later they woke to the realization that their best executives were all approaching retirement age, with too few mid-career execs being groomed to replace them.
“What’s keeping us so busy now is succession planning,” says Morse. “Companies are careful to ensure that they have been training and promoting younger people.”
Morse suggests that laid off workers who are looking for new positions should expect to spend significant time building a new resume, especially if it’s been a few years since they last did so. “A resume should be two pages. It should denote with clarity not just what they accomplished but how they accomplished it,” says Morse. Applicants should be sure to describe specific project experience. Companies currently struggling with reallocating and restructuring assets would be very interested in hearing if an applicant has experience in moving 100 drilling rigs in two months, for example. Other areas in demand right now include cost management, risk management, supply chain, and especially capital reallocation and restructuring.
Older workers often have a tougher time finding new jobs in times like this. But there’s at least one area in which older petroleum engineers might have a leg-up on their younger peers — in old conventional oil fields. The shale drilling boom has been “unconventional” relative to the way oilfields were drilled 50 years ago. But now with oil prices so low companies are looking back into their all but forgotten inventory of conventional fields — where drilling and production costs can be lower than in the shales. “Conventional skills are again in demand,” says Morse. Even if the big public companies might still be in layoff mode, Morse says there has been an influx of private equity, raising funds and building leadership teams. All told, says Morse, he and his 47 headhunters in the oil and gas practice ”have been as busy in the last 10 months as anytime in the past two years.”
There’s a last bit of hope for those laid off this year (especially in Houston). About 15 years ago Enron collapsed and thousands were laid off. Many of them have gone on to great things, just like those laid off in this collapse. “Ex-Enron staffers have had great careers at other companies,” says Morse. “There’s a terrific oil and gas talent base and they will find opportunities.”
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