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Zainab Calcuttawala

Zainab Calcuttawala

Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…

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Houston Oil and Gas: Cuts and Rehires Indefinitely Frozen

Despite indications that the Houston hemorrhage of oil and gas jobs has slowed down, the two-year old wave of advances in drilling and extraction technologies—pioneered by now-jobless engineers—will prevent rehiring from commencing any time soon.

Last week—and for the first time in over a year—oilfield services company Halliburton reported a quarterly profit. The profit was small in size, but refreshingly hopeful for Houston’s long-ailing oil and gas job market.

Months of job cuts and asset sales later, the company announced a slim $6 million profit and a stable global workforce at 50,000 employees.

A full ten percent of the 3,500 people Halliburton has fired over the past two years worked in Houston, making it the leading human-capital-bleeding energy company in the Texan city, according to August figures from the Houston Business Journal.

Industry patterns practically dictate that oilfield service companies are the first to feel the pain when a market downturn begins. When prices dropped from a high of over $115 in June 2014 to $79.44 in October of the same year, drillers immediately ditched the costs of renting equipment and additional services, true to form.

Offering deep discounts to otherwise pricey packages has become the norm for the services niche over the past two years as the oil supply glut looms large and proves unwieldy. The absence of a market correction has caused oilfield services giants, notably Halliburton and Schlumberger, to cut thousands of jobs.

Halliburton’s 2016 Q3 results, along with Baker Hughes and Schlumberger’s positive outlook on the status of the American drilling sector’s recovery send a clear signal: at even just a hair above $50, the oil price has risen high enough to end the oil and gas job cleanse in Houston.

This is good news only for those who have managed to keep their job after consecutive months of cuts in the metropolitan area, according to Jenny Philip, the senior manager of economic research for the Greater Houston Partnership. Related: Oil Jumps After EIA Reports Draw To U.S. Crude Stocks

“Houston is the energy capital of the world,” Philip said at an energy-related event during the WorkforceNEXT summit last week. “We love to boast about that in $100 oil, but we also have to own that in $26 oil or our current $52 oil.”

Philip’s analyst peers say $54 per barrel should trigger a round of new hiring as firms pursue new exploration projects, but she disagrees.

“We’re not going to see a huge hiring binge. As the industry recovers, significant hiring is still being held off,” the researcher said. “The concern with energy industry hiring is that a lot of the technological advances that were employed during the downturn actually cannibalized human capital. The projects that were hiring were the ones looking at technologies to take people out of the workforce.”

The drone company Cyberhawk leads one example of a major manpower-cutting initiative. It provides oil and gas companies such as Statoil, Shell and Total – all of which are active in Texas – with drones to conduct inspections that once took a 12-man team of engineers several weeks to complete.

With Cyberhawk’s equipment, the checks cost 90 percent less and take just two days.

So far, companies have been reluctant to reveal when, where, and how often they have used cost-reducing drones or similar services to try to stay afloat in a tight price environment.

If the job market has reduced as drastically due to technological innovation as Philip suggests, it is unlikely Houston’s oil and gas sector will ever need the human resources that it did at its peak in 2014.

By Zainab Calcuttawala for Oilprice.com

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