Companies planning for ‘jobless recovery’
Most firms surveyed planning changes in future after massive layoffs since 2014
Oil and gas companies laid off tens of thousands of people during the two-year-long collapse in crude prices and, a new study shows, some companies plan further reductions.
Ernst and Young and the University of Calgary’s Haskayne School of Business conducted a survey of 72 Canadian oil and gas companies and asked, given all the staff cuts that have been made over the past couple of years, whether executives are considering further changes to their organizations.
“Most are considering further changes in the future,” Lance Mortlock, EY’s Canadian strategy services leader for oil and gas, said in an interview. “Now, we’re seeing changes around, is there a better way of doing this? Is there a better way of organizing how we get work done?”
Mortlock said that when crude oil prices began to fall in the second half of 2014, companies reacted with layoffs to survive, but are now considering “different ways that you can do work — better, faster, cheaper — with less people involved.”
“I think executive teams are challenging themselves to find new ways of getting work done,” Mortlock said, citing robotics and process automation as options energy companies are considering to further drive down costs.
The study, released Thursday, reflects a widespread expectation in the oilpatch that the price recovery is likely to be a jobless one, where companies — spooked by continued commodity price volatility — continue to focus on cutting costs.
The U.S. West Texas Intermediate crude April contract, the new front-month future, settled 1.4 per cent lower at US$53.59 per barrel Wednesday. The price has nearly doubled after hitting a bottom of US$26 in February 2016, but remains below the comfort level of most producers.
The survey showed that 80 per cent of Canadian oil and gas companies had reduced their head count during the past two years — and nine per cent of the respondent companies, particularly in oilfield services and upstream exploration, cut more than 50 per cent of their staff.
The result was 30,000 direct job losses in Alberta alone, according to Canadian government data.
“While the majority of our market study respondents reported high levels of success with their reorganizations, many indicated that there are further changes to come,” Haskayne School of Business associate professor Peter Sherer said in a release.
The study showed companies that took a longer-term approach to the oil price collapse — by reducing salaries and re-assigning employees rather than just staff cuts — tended to be most satisfied with their reorganizations.
Roughly half, 49 per cent, of the respondent companies cut their head count between 10 per cent and 35 per cent during the downturn, and 81 per cent of those companies said their cost cutting efforts had above-average success rates.
Asked whether there were segments within the oil and gas industry that could see job growth if oil prices trended upward, Mortlock said, “If there’s one industry that concerns me the most, it’s oilfield services.”
Oilfield services companies were the most likely to reduce their head count by more than 50 per cent during the downturn, he said, and might also be most likely to be under pressure to hire again quickly if oilfield activity rebounds.
Drilling activity has rebounded from record lows set last year, but has yet to reach pre-downturn levels. In the last quarter of 2016, there were 172 drilling rigs working in Canada, up slightly from 168 during the same period in 2015, but a long way from the 384 rigs working at the end of 2014, according to the Canadian Association of Oilwell Drilling Contractors.
The number of rigs working in Canada increased sharply to 279 in January.