LET THE CUTTING BEGIN

Let the cutting begin. And it has. 

What once was an obvious paradise for some has now become big trouble in more than just the oil patch.

It sometimes might take awhile, but humans--especially those in business--have a way of changing their behavior when things get too touchy. 

And people in the oil business are no different. While some might view this as a big negative, we take a different tact. 

People losing their jobs is never a pleasant thing and we don't like it one bit. But like governments, industries get bloated. And sooner or later retrenching is necessary, something governments around the globe need to learn. However, we'll leave that one for another time.

For now a quick cruise around the Internet and one will see just how fast the oil industry is retrenching. The fallout from these cuts stretches far beyond just jobs and the oil sector. 

Housing market fallout: In the not too distant past, Credit Suisse was calling for brisk growth of up to 14% in Texas' home construction industry. Now the bank predicts a 20% drop because of the "knock-on effects" caused by job losses and reduced confidence from the energy slide.

Avoid homebuilders: For now, Credit Suisse is telling investors to steer clear of homebuilders with heavy exposure to oil-centric markets like Houston, Dallas, San Antonio, Austin and Denver.
 
All the articles below were written within the last few days. And you can expect many more depending on where oil prices settle.

JACKSON, Miss. — Low oil prices mean the driller that has been the most bullish on an oil region that straddles the Louisiana-Mississippi line is cutting back.

Goodrich Petroleum Corp., based in Houston, said Friday that it will spend $80 million to $100 million on exploration and drilling this week, down from $150 million to $200 million it had previously projected.

The company had projected that it would drill 16 to 21 wells in the Tuscaloosa Marine Shale region in southwest Mississippi and Louisiana’s Florida Parishes. A spokesman didn’t immediately respond to a request for comment, but the new budget will mean fewer wells drilled.

A number of other companies that had been drilling in the region have cut back or pulled out, in part because of high drilling costs per well.

Texas Keeps Losing Drilling Rigs

The Permian Basin has lost 65 rigs since the beginning of the year, to 371. The Eagle Ford Shale has lost 22 rigs since early January, with 178 still in the field as of today.

Other states with oil and gas activity have also seen a drop in the number of active drilling rigs. The U.S. is down 268 rigs so far this year, to 1,543.

North Dakota is down 26 rigs for the year, to 143. Oklahoma has lost 26 rigs, with 183 rigs still working. New Mexico is down 14 rigs, to 87 this week, according to Baker Hughes.

The research firm Drillinginfo recently looked at rig movement in the Eagle Ford by some of the biggest drilling companies. It said:

“It doesn’t appear that rigs are moving into or away from the Eagle Ford at an appreciable rate either way over the last couple of months. Additionally the Permian Basin, and Eaglebine are showing strong localized activity, and we have outlier activity along the coast and into further south Texas.”

Oil prices rallied on Friday to $47.59. Crude oil was selling for more than $100 per barrel in June, though.

Oklahoma drilling company to cut 2,000 jobs.
January 30, 2015

Oklahoma-based drilling contractor company Helmerich & Payne’s CEO announced Thursday that the company may have to cut as many as 2,000 jobs.

Helmerich & Payne CEO John Lindsay commented:

“Our field employee count is directly proportional to our rig count. Based on what we know today, it is possible that we will have approximately 2,000 or more field positions eliminated by the foreseeable rig reductions. This is, without question, the worst part of the downturn.”Helmerich shares fell as much as 10 percent to $54 on Thursday as weak forecast for 2015 margins and revenue overshadowed a better-than-expected quarterly profit. Helmerich said less than 200 rigs would be active by the end of the current quarter, down from over 297 in the first quarter. The company said that it expects rig revenue in its U.S. land drilling unit to average $27,000-$27,500 per day in the second quarter, below the $29,457 it recorded in the first quarter. Helmerich, which had about 11,901 employees as of September 30, also said it would now build only two high-tech FlexRigs per month this year, down from the four rigs it had planned.Halliburton recently released its fourth quarter earnings report for 2014 and reported total revenues of $8.8 billion compared to the previous quarter’s $8.7 billion, according to The Bakken Magazine.

For both the third and fourth quarters of 2014, the company’s adjusted operating income was $1.4 billion. For the third quarter, the operating income was $1.6 billion. For the fourth quarter, the company’s operating income was $1.3 billion. Total revenue for the previous year was $32.9 billion, a 12 percent increase from the company’s earnings in 2013.

Halliburton’s total operating income for 2014 was $5.1 billion, up substantially from the $3.1 billion operating income for 2013. The company stated that the increase can mostly be attributed to increased onshore activity in the United States and operations in the Macondo Prospect.

In a press release, Halliburton chairman and CEO Dave Lesar said, “We delivered an excellent 2014, but it is clear that 2015 will be a challenging year for the industry. As a result of the weakening outlook, during the fourth quarter of 2014 we took a $129 million restructuring charge to temper the impact of anticipated activity declines.”

Lesar also commented on the impact of the current global oil price market by saying, “Halliburton has successfully weathered multiple industry cycles. We are confident that we have the right people, technology, and strategies in place to outperform throughout this cycle too, and emerge as a stronger company.”

Late last year, Halliburton entered into a merger agreement with Baker Hughes. The pending deal is valued at $34.6 billion in which Halliburton will acquire the entirety of Baker Hughes’ outstanding shares in a stock and cash transaction. The deal is expected to be finalized in the second half of 2015 pending approval by stockholders of each company, traditional closing conditions and regulatory approval. After the deal is finalized, stockholders of Baker Hughes will own roughly 36 percent of the incorporated entity.

In the past few weeks, both companies have announced layoffs in various branches. Baker Hughes reported on plans to reduce capital spending by 20 percent and the layoffs of approximately 7,000 employees. Martin Craighead, Baker Hughes CEO, said the moves were a result of the industry-wide slowdown. Halliburton recently confirmed layoffs in its Duncan branch and projects to cut 1,000 jobs across multiple regions in the coming months.

HOUSTON – Petroleum producers took 94 oil-drilling rigs off the market in the United States this week as sub-$50 oil continued to wreak havoc on the oil industry, Baker Hughes reported Friday.
It was the biggest one-week decline for oil rigs since 1987, the earliest year of Baker Hughes data available. That year, the oil industry had faced another oil bust that left hundreds of rigs idle or repossessed by banks, which sold them for scrap.

This week’s drop left 1,223 oil units up, the lowest number in three years.
In Texas, 58 rigs were taken off the market, cutting the state’s count to 695 rigs. That’s down from 840 at the beginning of this month.

All told, the number of oil and gas rigs active in the United States fell by 90 to 1,543, as gas rigs increased by three and one other, so-called miscellaneous rig was propped up. The U.S. offshore rig count declined by 5 rigs, down to 49 units.

The decline came a day after the CEO of Helmerich & Payne CEO John Lindsay told investors the Oklahoma-based drilling contractor may have to cut 2,000 jobs in light of the falling rig count.
Lindsay said even some of the company’s souped-up FlexRigs, some of the most advanced models on the market, have been released, and that’s likely to continue.

Trouble has been looming over the oil patch since crude prices began falling last summer, from over $100 a barrel to under $50 today. But only now are the long-feared effects of a bust starting to ripple through the complex energy ecosystem, affecting Houston executives, California landowners and oil old-timers in Oklahoma.

DALLAS—Rumor became reality here last week when dozens of workers lost their jobs at Laredo Petroleum Inc. The Oklahoma-based energy outfit said it closed its regional office to cope with plunging oil prices.

The layoffs were “kind of like a death in the family,” says Robert Silver, age 62, a geophysicist who had helped Laredo decide where to drill in the Permian Basin in West Texas.

Trouble has been looming over the oil patch since crude prices began falling last summer, from over $100 a barrel to under $50 today. But only now are the long-feared effects of a bust starting to ripple through the complex energy ecosystem, affecting Houston executives, California landowners and oil old-timers in Oklahoma

Texas leads nation in drilling rig losses–again

6 days ago 1,330 Views

Max B. Baker | Fort Worth Star-Telegram

In Texas everything is bigger, or so the saying goes.

So it should come as no surprise that the Lone Star State leads the nation, for the second week in a row, in the loss of rigs searching for oil and natural gas, according to Baker Hughes, the Houston-based oilfield services company.

There were 13 fewer active rigs, leaving 753 still operating in Texas. Counting the 44 rigs pulled last week, there are 57 fewer crews working in the field, Baker Hughes reported. Since Jan. 2, the number of rigs working in Texas has dropped by 87, the company reported.

The number of rigs nationally dropped by 43 to 1,633 — 1,317 rigs exploring for oil and 316 for gas. A year ago, there were 1,777 rigs active, the Houston firm said.

Related: US rig count falls by 43 to 1,633

“There is no surprise there,” said Bernard Weinstein, an economist at Southern Methodist University’s Maguire Energy Institute. “The industry is still reacting to the expectation that prices will remain subdued for an extended period.”

While oil prices stabilized last week, the price per barrel continued its slump on Friday, closing at $45.49, a 72 cent drop for the day. The price of oil has been cut by more than in half since June.

Among the other major oil- and gas- producing states, North Dakota lost nine, Oklahoma fell eight, Ohio four, California and New Mexico each lost three and Utah two.

Kansas, West Virginia and Wyoming dropped one apiece.

In the Barnett Shale, the number of rigs, most of them primarily searching for natural gas, increased by one to 11, following a loss of six the week before, according to data compiled by RigData.

Tarrant, Denton and Jack counties each reported having two rigs, while Johnson, Palo Pinto, Parker, Stephens, and Wise reported one rig each.

As previously pointed out in one of our other post, "Oil Cuts Continue," some might get surprised how fast the oil industry can cut.