Oil Crash Is a Party Pooper as Holiday Affairs Lose Their Luster
(Bloomberg) -- The Grinch nearly stole Christmas in the oil patch this year.
Thanks to the lowest crude and natural gas prices in more than a decade, Norwegian oil and natural gas producer Statoil ASA cut its holiday party budget by about 40 percent from 2014. KBR Inc. and Marathon Oil opted for smaller affairs with less swank. One Houston hotel said its seasonal party business is down 25 percent from 2014. Pricey wine and champagne are off the menu.
The industry has shed more than 250,000 jobs and idled more than 1,000 rigs as crude prices fell by more than half since last year. Oil services, drilling and supply companies are bearing the brunt of the downturn and account for more than three quarters of the layoffs, according to industry consultant Graves & Co.
"You can’t have a $2 million Christmas party while at the same time laying off half your workforce," said Jordan Lewis, an operations manager and producer at Sullivan Group, a Houston event planning company.
Independent power generators have also been stung by cheap electricity amid declining gas prices. The heating and power plant fuel slid recently to the lowest level since 1999, and is heading for the biggest annual drop since 2006 as the lack of demand leaves stockpiles at a seasonal record.
The commodity rout and the layoffs that followed have dampened holiday festivities.
Several hundred Statoil employees were invited earlier this month to Minute Maid Park, where Major League Baseball’s Houston Astros play, for a party that featured scaled back entertainment and décor, spokesman Peter Symons said. At the Houston-based oil and gas construction firm KBR, management canceled this year’s companywide party. Instead, individual departments were encouraged to hold their own gatherings from potlucks to group socials, spokeswoman Brenna Hapes said.
"We are certainly being cost-conscious," Hapes said by telephone. "There’s also the added benefit of some team strengthening as well. Employees are spending time together with their colleagues in small gatherings, and that’s a good thing for our team."
Houston-based Marathon didn’t host a big party for reasons that were "along those same lines" as other firms, spokeswoman Lee Warren said, without elaborating. Spokesmen for other oil and gas majors, including Chevron Corp., BP Plc and Anadarko Petroleum Corp., declined to comment.
The cutbacks on entertainment have hit restaurants, hotels and other venues that rely on a boost in corporate spending during the holidays.
Ellen Jannik, event coordinator for Vic & Anthony’s, said the popular Houston steakhouse has been soliciting other corporate clients after oil and gas companies began downsizing holiday parties.
Most are "cutting back on the guest list, with some lower attendance groups," Jannik said. "We started reaching out to other industries, really anything outside of oil and gas, anything we can think of."
At the boutique Houston hotel La Colombe d’Or, home to the upscale Cinq restaurant where chicken-fried filet mignon goes for $49, business from holiday parties is down about 25 percent this month compared to last December, owner Steve Zimmerman said in a telephone interview. Parties that can include as many as 600 people are being cut by half, or canceled altogether. Oil and gas companies still hosting affairs are ditching the expensive wines and champagne they used to order when profits were fatter, he said.
"Even the companies that are still doing well don’t want to show it, and the oil services companies, which we used to host a lot, they just stopped everything," Zimmerman said.
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