The U.S. shale patch is seeing the deepest jobs cuts in three years as producers respond to lower oil prices with slowing drilling activity and greater efficiencies through consolidation and cost cuts.
Employment in the industry fell by 1.7% in August, per data from the Bureau of Labor Statistics (BLS) cited by Bloomberg.
In contrast, total U.S. nonfarm payroll employment changed little in August and has shown little change since April, BLS said in its most recent publication. In August, employment in mining, quarrying, and oil and gas extraction declined by 6,000 after changing little over the prior 12 months, the BLS data shows.
The number of jobs in the oil and gas sector has fallen to levels last seen in 2022, when the shale patch faced another oil glut.
This year, oil prices have declined by about 12% year to date, and analysts and industry executives expect there is room for further slides amid a market oversupply expected to materialize as soon as the fourth quarter.
U.S. oil producers are on the hunt for consolidation, synergies, efficiencies, and cost cuts to be able to sustain shareholder payouts at U.S. oil prices in the low $60s per barrel, and possibly lower later this year.
As the price of oil is dangerously close to breakevens for many smaller independents, the U.S. shale patch is in a wait-and-see mode. U.S. oil producers are trimming capital expenditure budgets, relying on efficiency gains from current drilling activity to keep output levels.
They expect to ride the price decline with minimal tweaks to strategies, for now.
The first tweaks include deferring well completions and pumping more with less—meaning jobs have to go.
The biggest producers are cutting headcount, too, in the thousands, following blockbuster acquisitions in recent months.
Chevron, which bought Hess Corporation for $53 billion, has said it would reduce its workforce by 20% by the end of 2026 as part of wide cost cuts. This includes 800 jobs in the Permian.
ConocoPhillips, which acquired Marathon Oil Corporation last year, plans to slash workforce numbers by up to 25% across functions and geographies to simplify the organization and cut costs.
Various industry associations have also flagged reduced job numbers in the U.S. oil patch, although they remain generally upbeat about the future prospects of the sector.
Yet, the number of oil and gas upstream jobs in Texas and total U.S. oilfield service jobs has dropped in recent months amid lower oil prices and slowing drilling activity.
Data from the Texas Workforce Commission showed upstream oil and natural gas employment fell by 1,400 in July compared to June, the Texas Oil & Gas Association (TXOGA) said in August.
June’s job loss has been revised to 1,500—less severe than the previously estimated 2,700. Despite declines over the past two months, year-to-date growth remains positive at 4,300 upstream jobs, TXOGA noted.
“Forecasts for lower prices can slow industry growth plans,” commented TXOGA President Todd Staples.
“With approximately 8 bcf/d of new LNG export capacity under development in Texas and multiple infrastructure projects announced, we are optimistic stable global market conditions will strengthen short-term demand and reinforce our energy workforce,” Staples added.
The August jobs report by the Energy Workforce & Technology Council found that the labour market continues to soften across both the energy services sector and the broader U.S. economy.
Total jobs in the energy services sector fell to 628,062 in August, down by 6,021 positions from July, according to preliminary data from BLS and Energy Workforce analysis.
“While the sector experienced a sharper decline this month, we are continuing to see companies adapt with long-term discipline and strategic focus,” said Energy Workforce president Molly Determan.
“This slowdown reflects broader economic pressures, but the foundation of the energy services industry remains strong,” Determan added, noting that stability and resilience are now the key focus of the industry.
“Companies are operating with resilience, embracing efficiency and preparing their workforce for the demands of an industrial economy. Our members are focused on stability today and strength tomorrow.”
By Tsvetana Paraskova for Oilprice.com
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