In the timespan between 2014 and 2016 there has been a substantial workforce reduction in the Oilfield service industry. About 35%, or 300 000 employees among the top 50 service companies, have been forced to leave the industry due to the long lasting downturn. Despite recent layoffs in the offshore industry, there are signs of optimism. Oilfield service activity is picking up significantly in 2017 and as a result, many service providers announced recruitment campaigns in the North American onshore market. In the offshore industry, the number of layoffs seems to have bottomed out, except for companies that consolidate through M&A’s.
Traditionally, the search for oil has driven hundreds of thousands of workers to the oilfields. However, from 2014 to 2016 the once booming industry became one of the largest job cutters, with an overall reduction of the full-time equivalents (FTE) of employees by ~35% for the biggest 50 service companies.
The North American market in particular, took a hard hit with the lower activity levels. Two of the largest land drilling companies - Nabors Industries and Helmerich & Payne - announced staff reductions on several occasions and both had an overall headcount reduction above 50%. The Big Four, all exposed to the US land market, fared no better and laid off approximately 30-40% of their workforce.
Overall, the offshore industry has been more resilient and represents many of the latest layoff announcements. FMC technologies reduced its staff by 1000 as an initiative of cutting costs prior to the Technip merger. In October 2016, Saipem revealed that 800 jobs needed to be cut in Europe. Lastly, Aker Solutions published in January 2017 that they were about to reduce it's workforce by 650 due to continued market slowdown and the company’s global reorganization.
Despite tough times, there is light in the end of the tunnel and 2017 is believed to be the turning point for the Oilfield services industry. With commodity prices improving since January 2016 and the rig count increasing, a new optimism is brought to the North American market. For instance, the Permian basin experiences an explosive growth in both equipment and personnel. Idled hydraulic fracturing spreads and stacked cementing equipment returned to the market. Several shale players have responded to this by rehiring people back to their businesses. For example, Halliburton announced last week an addition of 2000 jobs in the US to the pressure pumping and cementing business during the first half of 2017. This is the largest recruitment campaign among the dozens of companies in North American shale that are now hiring heavily, such as Precision Drilling, Weatherford and Nabors.
For the offshore exposed service companies, signs of activity increase are clear with a wave of new projects being announced. The layoffs are already flattening out and are on the brink of increasing again. The restructuring for most of the offshore service companies will be completed in 2017 and companies can focus on improving their top-line rather than cutting costs. In Norway, the cumulative number of layoffs in Q1 2017 did not increase, and those few companies that have announced cuts (GE-BHI and Aker Solutions) are balanced out by those that have started to recruit on the NCS. Globally, only increased M&A activity can delay the recruitment activity growth, which we expect to start H2 2017 for the offshore sector. Hence, the offshore industry is about to adapt to the new reality with lower activity levels, and rehiring will be required if offshore will have a comeback in 2018.
Rystad Energy at OTC 2017
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