Source: Drillinginfo RigData RADAR, September 12, 2019
Trey Cowan, Senior Analyst, Enverus Drillinginfo
Data from the Federal Reserve Bank of Dallas recently turned negative for employment in the oil patch. The drop during July equates to approximately 1,500 jobs lost in Texas. The recent drop contrasts with Texas oil and gas employments stats that had been trending favorably over the first half of this year. As we look to the back half of 2019, the pullback in Texas could foreshadow some layoffs across the entire industry during the next six months.
Related statistics from the Bureau of Labor Statistics provide an incongruous view of the oil and gas industry’s health. Specifically, these stats show the employment pool steadily growing by an average of 1,700 workers per month since the beginning of the year with sustained modest growth occurring in both July and August 2019. The likelihood that the national data is later revised down appears plausible considering some recent announcements from both operators and oilfield service contractors regarding layoffs. A short list of recent headlines includes EQT, NOV, Oasis, Whiting, and HiCrush who have all trimmed staff over the summer.
An easy back of the envelope calculation to predict the possible impact on employment can be derived by looking at the industry’s average employment per rig over time. In general, what we have seen is that as drilling and completion activities have become more complex, that employment has scaled up in a congruent fashion. Specifically, at the beginning of the shale revolution there were about 80 workers spread across the industry for every rig drilling. Today, there are about double that amount.
Over the past month we have seen about 90 rigs go idle. Multiplying these 90 rigs idled by the recent average of 160 workers spread across the industry per rig, implies a staff reduction across the industry of approximately 14,000 individuals to realign the industry’s headcount with current activity levels. While our calculation is just speculative, it hopefully serves as a sobering reminder of just how quickly the industry can turn when oil and gas prices soften dramatically
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