Layoffs Now Could Bring Headaches Later for Drillers and Suppliers
The typical cycle of cutbacks has already begun, said Gladney B. Darroh, president and CEO of Houston-based Piper-Morgan Associates Personnel.
Oilfield services companies have announced layoffs of thousands of workers in recent weeks. Those businesses are first to cut because they are dependent on contracts with exploration and production companies, many of which are scaling back operations and can no longer tap the high-yield debt that fueled their growth.
The 'great crew change'
E&P companies have begun cutting capital budgets, and will look to trim their workforce first by offering early retirement packages, Darroh told CNBC. If they cannot make the cuts they need to balance the books through enhanced exit offers, forced retirements will follow, he said.
"If (oil) prices stay in this range of $45 to $55 a barrel, if that persists in the next six months, we'll see companies taking more dramatic steps to rationalize their workforce in light of these new prices," he said.
In that scenario, companies face the danger of cutting too far and and putting too much stress on the remaining workers, some of whom could head for the exit, Darroh said. In particular, older workers who have seen their portfolios recover from the financial crisis may walk, Bush added.
That raises another concern: Layoffs could hasten the onset of the so-called great crew change. The oil industry employs a lot of entry-level workers and veterans with 25 years of experience or more, but midcareer professionals are in short supply, leaving few candidates to replace the seasoned pros.Click here to read more.
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