Energy Giants Announce Layoffs

January 16, 2015 Elizabeth Alford

Lower crude prices are a double edged sword. The average consumer may enjoy the benefits as cheap fuel reduces the costs of goods and services, but for those whose livelihood relies on the energy industry, the extra cash will be of little solice if they no longer have a job. It has taken some time for the reality of the low oil prices to finally trickle down, but after months of plummeting crude, the boom will become bust for the many who will soon face a pink slip.

Since November, one company after another announced massive reductions in their 2015 budgets as they have scrambled to cope with the dramatic 50% drop in crude prices since the summer. The next predictable step began last week as companies announced layoffs and prepare to scale back drilling operations.

Amidst the happy refrains from people who are enjoying lower gasoline prices, there is the occasional cynical comment that suggests the only ones who are hurt by low crude prices are the nameless, faceless, deep pockets of the energy companies. This represents a short-sighted and narrow view of the current reality facing workers, families and local economies.

Not only do layoffs affect workers directly, but a report authored by Dr. Robert W. “Bill” Gilmer for U.H.’s Bauer School of Business estimates that with each new energy job created/eliminated, there are three - four other jobs that are also create/eliminated.

“Discussing the impact on Houston, Gilmer predicts that “These cuts will be felt from Houston’s machine shops and factories to its office towers. The question becomes how this strange mix of good news and bad balances out to affect Houston’s economic prospects in 2015 and beyond.”

Since January 1st, a handful of companies have announced layoffs and it is only a matter of time before others follow. Some analysts predict things could get very ugly as the layoffs extend to local governments, small business and energy-supporting industries. Highlighted below are several giants who recently announced layoffs for early 2015.

Schlumberger: reported layoffs of a staggering 9000 workers more

Halliburton: recently laid off workers in Houston, but declined to give a specific number more

Apache: Also laid off an undisclosed number of workers worldwide more

U.S. Steel: Over 700 expected to be let go starting in march more

Supply Chain Initiative Launched for Bakken

January 14, 2015 Elizabeth Alford

Williston Economic Development (WED) has joined with DAWA Solutions Group to produce the 1st Annual Manufacturing and Logistics Conference (ManLog) to jumpstart its Enhanced Bakken Supply Chain Initiative. The event, scheduled for March 25-26, 2015 in Williston, ND is designed to connect the oil industry with other energy-related stakeholders in order to explore the opportunities they have in common.

“Shawn Wenko, Executive Director of Williston Economic Development said that, “One of our goals in 2015 is to help more of our regional manufacturing firms get connected to the oil and gas industry,” said Wenko. “Given the magnitude and expected duration of this $30 billion industry, now is the time to grow and diversify our economy throughout the region.”

“President of DAWA Solutions Group, Jeff Xarling explains further that “We need to start connecting those dots with regional manufacturers that can deliver more cost-effective products and services. The end result is a win-win with reduced costs for operators and economic development and diversification for companies and communities throughout the region.”

Halcón Resources Reduces 2015 Budget

January 12, 2015 Elizabeth Alford

In a press release on January 8th, Halcón Resources executives announced that they will slash their drilling and production budget almost in half for 2015. The Houston-based company affirmed it will reduce operations in the Bakken to two rigs in the Fort Berthold area of North Dakota.

This is the second round of cuts for the Bakken producer in less than two months due to the continued decline in oil prices. Projected spending for the company is set at between $375 - 425 million, which represent a steep decline from 2014 numbers of $950 million. Even with decreased spending for 2015, production is expected to increase to an average 40,000-45,000 barrels per day, compared to 43,554 b/d in the third quarter of 2014.

“Halcon CEO Floyd Wilson says that, “Our plan is to deploy capital to assets where results indicate EURs and initial production rates higher than our published type curves. We are comfortable with our current liquidity position and we expect our strong hedge portfolio to continue generating income well into 2016. Although we are significantly hedged, the continued weakness in crude oil prices, combined with elevated service costs, calls for conservative planning. We expect to see these costs come down dramatically during 2015.”

Read the full report at halconresources.com.

Obama Threatens Another Veto for Pipeline

January 8, 2015 Elizabeth Alford

On the very day that Congress reconvened, President Obama spoke out about his intentions to veto the latest version of the Keystone pipeline bill. This pronouncement escalates the standoff that has continued for over six years as lawmakers, divided along party line, have debated whether the benefits outweigh the potential risks of such a venture. The GOP has been very clear that this issue would be the first order of business for the 114th congress.

Until now, the president has been vague about his intentions and as late as Monday was not speaking publicly about this. But that all changed on Tuesday when White House Press Secretary, Josh Earnest, announced that a veto is likely.

“Earnest told USA Today that “I can confirm for you that if this bill passes this Congress, the president wouldn’t sign it either. And that’s because there is already a well established process in place to consider whether or not infrastructure projects like this are in the best interests of the country.”

Understandably, the President's decision has been difficult and disappointing news for Republicans who had hoped that their newly elected majority status would change the outcome.

“Sen. Mitch McConnell, R-Ky said that, “The president threatening to veto the first bipartisan infrastructure bill of the new Congress must come as a shock to the American people who spoke loudly in November in favor of bipartisan accomplishments. Once again the president is standing in the way of a shovel-ready jobs project that would help thousands of Americans find work.”

Read more in usatoday.com

photo credit: Barack Obama via photopin cc

Keystone Pipeline Set for Vote this Friday

January 6, 2015 Elizabeth Alford

As Congress heads back into session, GOP leaders wasted no time in submitting the latest version of the bill that would approve additional construction on the Keystone pipeline. The bill should come to a vote in the House as early as Friday before heading to the Senate early next week.

With all the controversy surrounding this construction, it has been quite a battle to get to this point. The application for this disputed section of the pipeline was submitted over six years ago and has been approved by the house many times. The difference now is that with a newly elected Republican majority, the bill is expected to easily pass both houses. The White House continues to remain silent about whether President Obama will veto the bill, though he recently shared his skepticism about its value to American consumers.

“The bill’s author, Rep. Kevin Cramer (R-N.D.), said in a statement that, “By passing this bill in the House and Senate with bipartisan votes, we can help provide the political muscle the president needs to finally approve this piece of critical transportation infrastructure, which will contribute thousands of jobs to the national economy and further our push toward national energy security.”

The construction of this pipeline is crucial to transport the record amounts of oil (830,000 b/d ) being produced in the Bakken region to the refineries on the Gulf Coast. Currently, just under 70% of all the oil produced in North Dakota is transported out of the state by rail. The Keystone XL Pipeline could alleviate some of the rail congestion being caused by the transport of oil, which would free up the rail service in North Dakota and across the midwest for the transport of other goods, primarily agricultural.