Oilfield services major Halliburton will furlough 3,500 employees for two months amid a drive to cut costs in the U.S. shale industry following the oil price rout sparked by the combination of a viral pandemic and an oil price war.
Reuters reported, citing the company, that the 3,500 employees will work alternating weekly schedules - one on, one off - during the period. They will only be paid for the weeks worked, Halliburton said.
The move is the latest in a string of announcements from the shale industry, all focusing on spending cuts of between 25 and 50 percent as West Texas Intermediate sank below $30 a barrel earlier this week, with prospects for improvement remaining distant.
At the time of writing, the U.S. oil price benchmark had fallen further, to $25.73 a barrel, with Brent crude at $29.37 a barrel. Since the start of the year, WTI has lost 50 percent of its value.
"We believe moving to this schedule will allow us to best manage costs and provide full benefits to our employees during this difficult market," a spokeswoman for the oilfield services major said in a statement.
Related: Largest Oil Glut In History Could Force Crude Prices Even Lower
Halliburton, Reuters notes, is the largest provider of hydraulic fracturing services in the U.S. shale patch. Despite its size, it is already feeling the pain from the oil price rout, with its share price tanking by 70 percent over the last four weeks to just above $6 apiece.
More pain is to come: at least one U.S. shale producer, Parsley Energy, has asked oilfield service providers to cut their prices by as much as 25 percent to help E&Ps weather the new crisis.
A recent calculation by Rystad Energy revealed there are just 16 exploration and production companies active in the U.S. shale patch that have new oil well costs of below $35 a barrel, among them Exxon, Chevron, EOG Resources, and Devon Energy. Even these, however, are announcing spending cuts.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
And yet, the US Energy Information Administration (EIA) is still hyping about rises in US shale oil production even when the US shale oil industry is on the verge of collapse with hundreds of bankruptcies already announced.
In the view of the EIA, neither a steep decline in oil rigs, nor numerous bankruptcies among US shale oil drillers nor collapsing oil prices will stop US shale oil production growing. It is a miracle in self-delusion.
If it is still doing so well, why then did the Trump administration decide to buy 77.0 million barrels of US shale oil for the Strategic Petroleum Reserve in order to stave off its total bankruptcy.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London