HOUSTON – Texas oil drillers have lost one in three jobs to the furious downturn in energy prices over the past two years, and mass layoffs could continue for months even though oil prices are rising.
The oil-rich state shed another 6,300 petroleum jobs in April, bringing the Texas tally to 99,000 workers as producers continue to reel from a toxic combination of high costs, big debts and low commodity prices. Texas job losses amount to 32 percent of the oil industry’s workforce across the state, and it will probably get worse, according to Texas economist Karr Ingham’s monthly report on the Texas oil industry.
“There’s a six-month window between the change in oil prices and the change in employment,” Ingham said in an interview. “We’re still losing big chunks of jobs with each passing month.”
The oil bust, he said, could ultimately shrink the state’s oil workforce back down to the size it was during the height of the Great Recession in 2009, if Texas shed a couple thousand jobs over the next few months. Texas had 207,000 upstream workers in April, compared to 185,000 at the lowest point in 2009.
“We’re going to cut it very close,” he said.
Rising oil prices won’t stop the bleeding. In 2014, drilling activity started to decline months after prices began dropping, and the same will likely be true of the market recovery, Ingham said.
This week, even as crude prices flirted with $50 a barrel, Texas labor regulators said Houston energy service company National Oilwell Varco plans to cut 54 jobs at its facility in Galena Park east of Houston next month. It’s just another drop in the sea of pink slips that has engulfed more than 350,000 petroleum workers around the world, according to Houston consultant Graves & Co.
U.S. drillers couldn’t generate any cash selling oil at $26 a barrel in February, and they still had to pay off large debts that have forced scores of oil companies like Linn Energy, Energy XXI and Ultra Petroleum to shuffle into bankruptcy court. It has amounted to the worst financial squeeze the industry ever faced, making the major setbacks in 2009 and the early 2000s look easy, according to Rystad Energy, and drillers are still dealing with the aftermath.
The industry has cut $300 billion in spending worldwide since 2014, and in the United States, the number of rigs drilling for oil has dropped from more than 1,600 to 316. EOG Resources believes it’ll take $65 oil to reverse the decline in U.S. crude production, which slipped by 6,400 barrels a day in March, according to the U.S. Energy Information Administration.
“Before we see an uptick in exploration and production spending, we need to see them repair their balance sheets,” said Robert MacKenzie, an analyst at Iberia Capital Partners in New Orleans. “It’s a barrier. They have to be confident that prices are truly rebounding.”
Ingham said his Texas Petro Index, a measure of upstream activity in the state, was 164.5 in April, down from a peak of 313.3 in November 2014. The number of drilling permits issued in April was down by one fifth compared to the same month a year ago.
