By Chris Frevert, Managing Director
Survey Details Reductions in Gross Revenues, Work Volume, and Headcount
Since 2014, over 61% of oilfield service company owners have reduced their rates for top customers by more than 20%, and over 65% have seen their gross revenues decline by over 30%, according to our survey of owners and C-level executives of privately-held US oil and gas companies.
The start of 2016 brought continued bad news for the energy industry, but the embers of optimism glowed at even the slightest whisper of recovery. During the three weeks our survey was open in March 2016, rig counts bottomed out at the lowest level since Baker Hughes began publishing data in 1949, settling at 476 at survey’s close, but WTI prices inched upwards buoyed by rumors of an OPEC production freeze, landing at $39.44 on March 18. Respondents did not expect much more from the crude markets as 76% of the respondents expect the WTI price to remain below $40 barrel at June 30.
Most of the service and manufacturing company executives that we’ve spoken with came into 2016 with low expectations for any meaningful recovery and are planning for another down year.
The real loser in the downturn is the energy sector worker as 92% of respondents have reduced their workforce, including 41% that have laid-off more than 30% of their staff. Only 25% of these company execs plan to hold current staffing levels or add employees in the next 3 months giving rise to more layoffs for the majority of companies. For those workers who are able to maintain a position, there will likely be changes to compensation for some as more than 50% or respondents said they intend to implement decreases in pay and 38% indicated that benefits would be cut to adjust to current conditions.
There is a very real emotional toll that’s being taken as these execs deal with letting good people go.
A respondent from the Bakken region commented on the industry in general “Proactive and positive political polices need to be implemented to encourage business in the energy space. There needs to be a better education to the public in how energy provides so much to North America’s standard of living.”
As with the previous two surveys Citadel has conducted regarding the effects of the downturn on mid-market oilfield service companies, the majority of respondents have been in business for more than 10 years and represented companies in all major U.S. basins.