HOUSTON – Houston-based drilling rig contractor Hercules Offshore has told Texas regulators it will lay off 324 employees, nearly 15 percent of its workforce, as it shuts down four rigs in the Gulf of Mexico.
In a letter to the Texas Workforce Commission received late last week, Hercules said the reductions are expected to begin around Dec. 31 and the cuts will likely be permanent. Senior employees won’t have the right to assume jobs held by more junior employees, called bumping rights.
The company said it has already notified employees of the job cuts.
“Unfortunately, our business is cyclical, and this is a downturn, and we’re reacting like we always do in a downturn,” Jim Noe, senior vice president and general counsel for Hercules, said in an interview with Fuelfix on Monday.
“We stack rigs when times are lean, but eventually we fully expect demand will pick up in the Gulf of Mexico,” Noe said. “I think this onslaught of domestic production has dislocated the worldwide oil markets, and as a result we didn’t have work for four of the rigs.”
Noe said the speed of the decline has surprised many in the industry.
The employees work on offshore rigs in the Gulf, taking off from Hercules’ docks in Louisiana and Galveston and reporting to the company’s main office in Houston. Hercules had 2,200 employees at the end of last year, according to regulatory filings.
News of the cuts come after Hercules reported an $88.6 million loss in the third quarter, as oil producers have used fewer drilling rigs in the Gulf and elsewhere and daily rates for running offshore rigs has declined about 30 percent in recent months. It said its utilization rate in the domestic offshore market slipped from 91 percent in the third quarter last year to 68 percent in the July-September period.