Oil industry stalwart slashes jobs
Anadarko has resisted layoffs in previous slumps
Anadarko Petroleum Corp., a resilient U.S. oil company that barreled through the 2009 oil-market crash with its payroll fully intact, said Thursday it’s finally giving in to market forces and cutting about 1,000 jobs companywide.
Those employees, about 17 percent of Anadarko’s workforce, are the latest casualties of an energy downturn that has cost the industry more than 320,000 jobs worldwide since late 2014.
The U.S. shale oil industry has almost capitulated in the international market-share war with big oilproducing nations, but the exodus from the biggest employer in The Woodlands — a strong beneficiary of economic growth during the oil boom — shows just how much damage the oil bust has done.
“If Anadarko has to go through this, it tells you a lot about the state of the industry,” said Subash Chandra, an energy analyst at Guggenheim Securities in New York. “Oil prices are not just low, they’re going to be lower for longer. U.S. producers just cannot remain impervious forever, no matter how good their track record has been.”
The local oil explorer and producer has long been considered a safe harbor, avoiding layoffs for more than a year and a half as oil prices collapsed. It continued to build its reputation as a breeding ground for oil-industry talent, with a deep reservoir of petroleum engineers and geologists who often disperse throughout the industry to take executive roles.
After an 18-month oil bust, energy layoffs are nothing new. Oil producers have contributed a fifth of the 320,000 global ener-
“We’ve learned from previous downturns that we will get through this. In the meantime, it’s not without pain.”
Ed Robb, The Woodlands governing board chair
gy job cuts, joining oil equipment makers, rig contractors, refineries and pipeline operators, according to Houston consultancy Graves & Co., which has tracked industry layoffs since the downturn began.
But Anadarko, the fourthlargest U.S. oil company, was supposed to be different. It has more sources of cash flow than most of its smaller land-locked rivals in the United States, with big international and offshore projects in fields overseas, its own pipelines and a footprint in the nation’s most prolific fields. Anadarko CEO Al Walker, who was unavailable for comment on Thursday, last year dismissed the possibility of a major payroll cut, saying “if oil went to $10 and stayed there for a long time, we might have to look at it.”
That has changed. The company now believes low prices for both oil and natural gas in North America will last longer than anticipated and will continue to drive down spending and domestic drilling activity, Anadarko spokesman John Christiansen said Thursday.
Recovery not expected soon
U.S. crude settled at $37.84 a barrel on Thursday, 64 percent lower than it was at its most recent peak in June 2014, and analysts don’t expect it to start a significant recovery until 2017. “Unless something dramatic happens, they’re not going to need that infrastructure (of workers) for some time,” Chandra of Guggenheim said.
It’s reverberating in the Houston area. Last year, the area lost 43,000 jobs in the oil production business and machinery and fabricated metals, but overall the region continued to grow, with a net increase of 15,200 jobs, according to the latest estimate by the Institute for Regional Forecasting at the University of Houston.
Bill Gilmer, director of the institute, said his most recent forecast for Houston’s job market indicates the region will add 17,000 jobs this year. But that estimate was calculated last year, before crude prices fell to their recent depths and before companies announced a flurry of deep budget cuts.
“We’ve lost more in capital expenditures than we were spending in 1982,” Gilmer said. “This is a really tough downturn, and it has been amazing how fast it has happened, and how far it has come.”
A healthy U.S. economy, robust health care hiring and a petrochemical construction boom on Houston’s east side, driven by cheap energy prices, have kept the region out of recession, Gilmer said. But it is likely Houston’s job growth will come in under his forecasts, he added.
Still, many laid-off workers have been able to find employment with comparable pay and with similar skill requirements in Houston and elsewhere, in the chemicals industry, with infrastructure projects managed by the U.S. government and other specialty contracts, said Janette Marx, chief operating officer of recruiting company Airswift.
Cuts across the board
Earlier this month, Anadarko said it would cut its U.S. rig count by 80 percent to just five drilling rigs, and it would cut its capital spending in half, which would force its oil and natural gas production down 3 percent this year. It also recently announced an 81 percent cut to its shareholder dividend, an unprecedented cut.
The job cuts, Anadarko’s latest move to cope with the downturn, will be felt in The Woodlands, which has had strong economic growth during the oil boom.
“We’ve learned from previous downturns that we will get through this,” said Ed Robb, chairman of The Woodlands’ governing board. “In the meantime, it’s not without pain. They’re jobs that belong to people with families, and now there’s anxiety.”
But however many jobs were cut in The Woodlands, it shouldn’t affect the township because the governing board anticipated softening revenues in its annual budget, Robb said.
Fourteen years ago, Anadarko moved to The Woodlands from Greenspoint in North Houston, bolstering job growth in the area and eventually becoming the biggest employer in the region, with more than 3,800 local employees before Thursday. A few years ago Exxon Mobil Corp. began building a massive campus in the area, and is now the third-largest employer there.
Anadarko’s gleaming twin office towers meet at the middle of a bustling retail center in The Woodlands. Just around the corner, a second hotel opened this month. The Woodlands Mall, the largest retail center in the area, is nearby, along with an array of shops and restaurants. The company’s employees regularly stream out for lunch and drinks.
“They all held out for as long as they could,” said Doug Grady, general manager at Bar Louie, referring to local companies that have cut workers in recent months. The bar is a popular watering hole for local employees and the downturn could be bad for business. “People are going to be more judicious with their money.”
Boom starts to slow
In recent years, home and land prices in The Woodlands have skyrocketed, but those prices have begun to level off, and there is more than 1 million square feet of Class A speculative office space available in buildings that are nearing completion but were planned and financed when crude prices were $100 a barrel.
That’s an unprecedented amount of available space, said Gil Staley, chief executive of The Woodlands Area Economic Development Partnership.
“We’ve never seen that much on the market ready to lease before,” Staley said. “That’s how much it has changed in the time that these buildings were finished, which is significant. You can go to downtown Houston and see millions of square feet available. It is the entire region that’s impacted by the downturn.”