​Yager: Oil and gas service companies are cautiously rehiring

“People who need people are the luckiest people in the world.”

Written in 1964 for the Broadway musical Funny Girl and recorded by Barbara Streisand and many others, these words finally apply again to Canada’s battered oilfield services (OFS) industry.

Because of all the problems OFS managers face to stay in business, not having enough personnel to do the work is the most rewarding to solve. So it goes in the fall of 2016. Needing more people tomorrow than yesterday means business is improving. Haven’t seen that in over two years.

Certainly not a boom, but it reflects growing demand for drilling and service rigs, frac crews and support services. The JWN Rig Locator reports September 20 there were 151 rigs drilling, the highest number since February. The uptick in service rig and frac activity has been even greater as operators spend to sustain production.

OFS is hiring but unfortunately paying much less than two years ago. Labour shortages through the go-go years of 2010-14 drove wages up and too many green hands doing important jobs sent productivity down. Costs ballooned. Unsustainable.

It got stupid. Calgary sales reps for high demand items like fracs and multistage packer assemblies could make $500,000-plus. Rig toolpushers and other senior supervisory field hands were paid $250,000 or more. Anybody with a pulse who could pee clean in Fort McMurray earned $150,000. Flying in and housing workers from anywhere at whatever cost seemed rational. But inexperienced personnel in key positions delayed operations at great cost. Too many things had to be done twice.

The point is not to lay blame. Everyone is culpable. But without $100/bbl oil it could not continue.

It ended with the oil price collapse. As the old saying goes, when exploration and production (E&P) companies get a cold, OFS gets pneumonia. After crude fell, E&P demanded its supply chain adjust accordingly. When everything else was cut, OFS managers went after the largest expense: labour. Workers were given two options: work for less or go home. Even after voluntary financial self-immolation, tens of thousands were terminated. Except for unionized labour, nobody in OFS earns today what they did in 2014. Some are paid half or less. The working oilpatch was not ready for this.

In May 2015, Albertans elected an NDP government that believed the oil industry was as much as liability as an asset because of carbon emissions. This was followed last October by a Liberal federal government with a similar view. As struggling oil workers tried to get the attention of Edmonton and Ottawa, the public discussion was about climate change, carbon taxes and how wonderful Earth will be when we use less oil. They won’t admit it, but these governments made a bad situation much worse.

Things got really awful. Many claimed it was the worst downturn ever. (It’s not. Most of the folks working in 2014 were too young to remember the oilpatch nuclear winter of the late 1980s.) Support groups like the Facebook page Oil People Helping Oil People emerged. Some shared advice, others opportunities. The rest poured their guts out about the formerly proud wage earners in their families who not only had no work but their own governments didn’t care.

Alberta’s NDP is so determined to take the province in a new and uncharted direction it intentionally insults unemployed oil workers. An example: Premier Rachel Notley appointed professional oilsands enemy Tzeporah Berman to co-chair of the Oil Sands Advisory Group. While on the government payroll—and contrary to the premier’s stated position—Berman recently wondered publicly why new oil export pipelines were needed given the emissions cap.

The message to the unemployed is devastating. Not only did you lose your job and your livelihood but, to save the world, you’ll never get it back. There is no time in history when the direction of the provincial government and the basic needs of so many have been this diametrically opposed.

Thankfully, oil prices have stabilized and E&P companies are, out of necessity, going back to work. Because of enormous OFS compensation sacrifices and an increase in productivity some E&P companies can make more things work at lower oil prices. OFS still can’t make any money but higher demand and utilization are the first steps toward the price increases essential for survival.

The light at the end of tunnel may not be a train after all. But, wow, is this stinking tunnel ever long. It’s hard to imagine things will ever be the same.

Like this? Check out the latest issue of Oilweek.

David Yager is a long-time industry commentator and an oilfield service management consultant in Calgary.

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