|Date Published||May 26, 2017|
|Article Author||Kevin Turko|
|Article Type||May 2017 Issue|
|Category||Articles, CEO Message|
|Tags||E&P, Economic Downturns, Oil & Gas Industry, Oil & Gas Recovery, S&S|
Many companies have managed to keep the flame in their torch burning, but not every company, contractor and employee has been so lucky. Just like Survivor, many have had their torch extinguished by boards, bankers and investors and have been ‘voted’ off the island. As they say on the show, The Tribe Has Spoken!
Welcome to our latest issue of Oilfield PULSE, Survivor Alberta, Never Give Up, Never Surrender! The companies participating in our Oilfield HUB service and online supply network are our tribe in more ways than one! We’re all connected to people or businesses who have been adversely impacted. Some have decided, or have been forced to leave the industry forever. The rest are re-grouping, re-organizing and re-financing to fight the battle another day. This month, we asked our contributors to help us tell their stories and to share their experiences.
The game of Survivor Alberta we’ve been playing, albeit unwillingly, has taken its toll. Those with the financial resources stemming from strong balance sheets, and forward thinking credit risk management programs have been fortunate enough to remain on the energy sector island. Never Give Up, Never Surrender! The business war cry still being yelled past many unoccupied offices and across vacant hallways in downtown Calgary.
But many are suggesting not much has changed in recent months. From a Producer and EPC standpoint, there still appears to be an ongoing emphasis on a focused downward pressure on service pricing. Capital and field project cost reductions are still a major target and mandate for most finance, operations and procurement personnel. While oil & gas prices appear to have stabilized to some degree, current service and contract price levels are still not recognized, rightly or wrongly, as being sufficiently reduced to a level that Producers are willing, or in their minds, can sustainably stomach. They are still attempting to wring more costs out of the AFE equation at every turn on both existing, and those all important newly proposed and tendered projects.
When speaking with a human resource hiring firm, they indicated the tables have changed quite dramatically over the past couple of years.
When speaking with a human resource hiring firm, they indicated the tables have changed quite dramatically over the past couple of years. The oil & gas industry for decades has been the top payer and chief competitor for top level employee and contractor talent in the cities and towns they are operating in. As the top dog, O&G was followed by premium public sector pay scales and lastly by the remainder of the business and retail sectors. Now the shiny luster of the energy star has been tarnished with layoffs, firings, reduced working hours and significant salary reductions. Up to 60% in some cases! So much so that the energy sector is no longer the darling of potential employers or the envy of other industry sectors. In Alberta, the Public Sector has quietly become the employer of choice, now offering higher salaries, better benefits and the significant appeal of long term job security. Regardless of our political leaning.
The net result and the natural reflex action of Producers is to turn toward their service providers, again and again, to trim the AFE budgets even thinner. The correlating impact is continued cost-cutting and employee bloodletting at service companies to reduce operating costs even further to stay competitive. The lack of new drilling activity and other field project work resulted in a massive exodus of experienced service talent leaving the industry, and now is prohibiting these same individuals from returning to the industry. Service companies are just not able to offer the same pay scales and benefits enjoyed a few short years ago.
So, who blinks first, Producers, their EPCs, or Energy Services Companies? It’s a cyclical problem the industry has experienced before. Now that the obvious surplus costs have been weened out of the industry, how does it move forward without risking the long-term loss of this experienced talent it so desperately needs to survive and achieve future sustained success. Everyone involved in this precarious cost cutting, resource balancing equation in 2017 and beyond, must change their industry view even more drastically. They need to help shed the industry’s historical high cost reputation and let go of the tired operating paradigm of ‘this is the way we’ve always done it’. The oil & gas industry needs this experienced talent back, but not at the expense of simply circling back to the way companies operated and spent money in prosperous years gone by.
There has to be a better way! The tribe has spoken. But this time it’s not time for us to go. And undoubtedly there will be a next time! Survivor Alberta, never give up, never surrender!