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Optimism Remains In North Dakota, But For How Long?

Ordinarily, a good way to gauge the business climate of a region or a state is to look at its employment statistics. So you might expect to see the jobless rate in North Dakota to be rising as the price of oil drops.

But in North Dakota, the poster child of the US boom in shale oil, the unemployment rate in December 2014 was just 2.8 percent, just a tick above the 2.5 percent recorded in April, two months before the big slide in oil prices began. And its payroll grew by 5.4 percent, or more than 24,000 workers, last year.

“This won’t be a bust,” Harold Hamm told Bloomberg. Hamm is the founder and CEO of Continental Resources Inc., the largest leaseholder and producer in the Bakken shale region of North Dakota and Montana. “There’s plenty to do.”

Related: U.S. Shale Boom May Come To Abrupt End

And finding workers can be hard work. So employers in North Dakota aren’t quick to lay off workers in a fairly remote state in the US upper Midwest with the country’s fourth-smallest population and, by extension, not a lot of able-bodied oil workers to go around.

Besides, North Dakotans say, if the price of oil can fall, it can also rise again.

As a result, layoffs are down, according to jobless filings: In December 2014, applications for unemployment insurance payments numbered 4,192, 12.4 percent lower than in December 2013.

One example of steady employment is Whiting Petroleum Corp. North Dakota’s largest oil producer, which is going to keep all its 507 employees, according to spokesman Eric Hagen. And oilfield services giant Halliburton Corp. has given the same message to its 1,500 employees in the state, although spokeswoman Susie McMichael says the company is prepared to cut costs in the future if necessary.

The same is true for Hess Corp., the third-largest oil producer in the states. “We’re all about lean efficiencies,” spokesman Jon Roper said, “but there are no plans for layoffs.”

But maybe the operative word should be “efficiencies.” While jobs seem safe for now, the number of work hours often is being reduced. At least that’s what’s happened to Ahmed Osman.

To work in the oil industry, Osman moved across North Dakota from Fargo in the east, on the border with Minnesota, to Williston, nearly 400 miles to the west near the state’s border with Montana. He was used to working 16-hour days trucking sand and water needed for hydraulic fracturing at oil and gas wells.

But hydraulic fracturing, or fracking, is an expensive extraction method for oil and gas, and the lower price of oil – now around $50 per barrel – has made work in the Bakken fields less profitable than they were only seven months ago, when the price of oil was over $100 a barrel. So Osman says his workdays are usually half as long. as oil companies pare back their operations.

Related: U.S. Supply Growth To Halt This Summer

And, despite the upbeat attitude of oil companies operating in North Dakota, Osman said he fears he may lose his job altogether. So recently he visited a job fair in Williston looking for a company in a different part of the oil industry that may be hiring.

Ron Ness is a bit worried, too. The president of the North Dakota Petroleum Council fears prices may not go up soon enough to maintain the employment status quo.

“As we move into spring and into June, … you’re going to see some pretty substantial correction in terms of activity,” Ness said. “At this point, I think companies are preparing to buckle down the hatches and cover the costs and try and reduce costs where possible.”

By Andy Tully of Oilprice.com

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