State of the Sector: Long Road Ahead for OFS Companies to Rebuild Workforce

State of the Sector: Long Road Ahead for OFS Companies to Rebuild Workforce
Oilfield services companies will face some challenges in rebuilding their workforce during the industry's recovery.

Editor's Note: This is the third story in a series examining the oilfield services sector for 2017. For yesterday's story, click here.

With the worst of the oil and gas industry downturn in the rearview, companies are starting to focus their energies on E&P (exploration and production) again. But they’ll need workers to do that. While supermajors and smaller independents alike have had to trim staff – often times making multiple cuts – the industry has bottomed out and may now need some of the very people they’ve let go, which could prove challenging for some oilfield services companies.

Study: Laid Off Workers Find Jobs Outside of Oil, Gas

While oilfield services companies like Halliburton are ramping up hiring in hot spots like the Permian, it may not be as easy as simply flipping the switch on hiring for many companies.

Bob Newhouse
Bob Newhouse, Founder/CEO, Newhouse Consultants
Founder/CEO, Newhouse Consultants

“In some cases, I’m sure the HR recruiting function has been reduced in size as well,” Bob Newhouse, CEO of Newhouse Consultants and former vice president of learning and development for Noble Corporation, tells Rigzone. “There may actually need to be some staffing up there to have a more robust talent acquisition process.”

Coupled with the fact that many laid off oil and gas workers have found jobs outside of industry – a University of Houston study found that of laid off industry workers who have found new jobs, 65 percent found jobs outside of oil and gas – companies may face challenges securing their workforce.

Additional findings from the study of more than 700 industry professionals reveal that 55 percent of respondents said they are considering leaving the industry over the next 12 months.

Newhouse, a principal in the study, said responses don’t necessarily correspond with job search activity as most laid off workers are still sending applications to oil and gas companies.

“It’s a little bit of a mixed message, but I think it’s fair to say that there’s trepidation about the health of the industry,” he said. “Those 65 percent that have moved on … are they lost to us? Will they come back? I think that remains to be seen.”

North American Labor Shortages

Ramp up of activity has already created its own set of challenges for some oilfield services companies in North America, according to energy analysts at Evercore. In a Jan. 25 note to investors, Evercore’s James West said since the increase in activity, oilfield services companies are experiencing a labor squeeze.

Speaking to three separate field professionals, Evercore learned of those challenges, which include almost double staffing lead times by 2Q 2017, relocation of field personnel from international markets to the United States to keep up with domestic activity and companies forced to turn down contracts because of crew shortages.

Despite these labor challenges during the early stages of the industry’s recovery, analysts believe robust hiring and training will come from service pricing increases.

“E&Ps will throw enough money at [the North American] labor problem to bring the sector back to equilibrium, sacrificing capital efficiency to hit production targets,” West said.  


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