Survey: Oil field services companies feeling pressure as cuts continue

The continued slump in crude prices has left the owners of some oil field services companies feeling desperate about their ability to keep going without some help from the producers they serve.

Citadel Advisory Group, a consulting group specializing in energy industry mergers and acquisitions, said in its mid-year report on a survey of hundreds of oil field services executives that nearly all of the respondents were pessimistic about their ability to renegotiate rates with their biggest customers amid unstable oil prices.

According to Citadel, every surveyed executive said they’ve had to negotiate price reductions with their biggest customers on their oil field products and services. More than a quarter of the respondents said they’ve reduced their prices more than 20 percent.

Many of the biggest oil and gas producers have said that the cost cutting will make their operations more efficient and better at providing value to their shareholders over the long run, finding ways to become more efficient that will benefit them once oil prices rebound. But on the other side of that scenario are the oil field service providers who are bearing the brunt of the effects of the crude crash.

Some of their responses to the Citadel survey read like alarm bells.

“If oil drops to $36, I expect 90%-100% [workforce] reduction,” a consulting company respondent to the survey said.

In more than a year since crude oil prices hit their peak in June 2014 before tumbling to six-year lows last August, layoffs in the global oil and gas indsutry have nearly hit 200,000, with most of those job losses coming from the oil field services sector.

Related: Energy job cuts approaching 200,000 worldwide

While some analysts have said that producers could make up the bulk of future workforce cuts, most of the oil field services respondents to the survey said they don’t see cuts in their rates slacking anytime soon. Close to two-thirds of the executives said on the survey that they expected their customers to request further cost reductions.

When asked about the prospect of future cuts, a respondent from a Niobrara Shale completions company summed up the situation saying “There is no more to give!!!”

Nearly three-quarters of the respondents had been operating for more than 10 years, and Citadel said many had likely seen the roller-coaster effects of previous crashes.

“I am proactively guiding my ship to as soft a landing as possible,” one respondent from the Eagle Ford Shale said. “This feels like the summer of 1986.”

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