Trouble Ahead for the Energy Sector: Something has to Change

May 6th, 2009 by

By Pat Hinds

The front page of the Calgary Herald today reads, Oilfield Sheds 25% of Workers in 2009. According to the article a survey was completed and 1 out of 4 energy service employees has lost their job totaling 15,000 people since the Fall of 2008. I understand the supply and demand of natural gas and the fact that we now have an over supply of both oil & gas in this weak economy. People are predicting natural gas could hit $2.75 a BTU or less prior towards the end of 2009. The weak price of natural gas has a huge impact on the cash flow of every major oil and gas company operating in North America; as a result they need to manage cost.

With all the focus on the credit crisis and cash flow challenges, the issue of not having the workforce required to support demand when the economy starts to grow is being ignored; these massive lay-offs will compound the issue for the oil & gas sector when the economy does rebound. A couple of days ago, the Calgary Herald ran an article entitled, Talisman Stock Soars on Strong Quarter, and the CEO of Talisman John Manzoni was quoted as saying that, “The company is in excellent financial shape.” Nevertheless it is cutting its 2009 budget by 9% and would go deeper if required.

These oil & gas companies need to take responsibity to keeping people working in the industry or the drastic cost cutting actions will take a toll on its most valuable resource – namely people. The reduction of staff will have inflationary impact in the next 5 years that will make the credit crisis pale in comparison. When the price of gas strengthens and the oil & gas companies want to improve shareholder value by establishing a drilling program, they will not have the people required to do the job. There has to be a balance in the industry in these tough economic times where the service sector and the oil & gas companies work together to retain employees all the while trying to attract new employees to the industry. Oil and gas companies need to take a longer view of the economy and start getting enegy service people back to work, or, pay the price in the near future.

Topics: Sales Consulting