Supermajors Slim Down to Protect Shareholder Payouts.jpeg
Oil prices in the $60s and $70s per barrel.
The smaller and medium-sized oil and gas firms need to streamline operations, cut costs, and improve efficiencies to survive in the new era of low oil prices and increasing pressure to reduce carbon emissions.
The industry is facing a perfect storm of challenges, including the energy transition, which is pushing companies to diversify into renewables and cleaner energy sources.
As a result, layoffs are expected to continue in the oil and gas sector as companies adjust to the new reality of lower oil prices and the need to cut costs and improve efficiency.
The job cuts are not only a response to lower oil prices but also a strategic move to position the companies for future growth and profitability in a rapidly changing energy landscape.
Oil prices are currently hovering in the low $60s per barrel, with predictions of a possible further decline later this year. As a result, companies in the oil and gas industry are preparing to weather the storm with minimal adjustments to their strategies, at least for the time being.
One of the initial changes being made by these companies involves deferring well completions and adopting more efficient pumping methods, which unfortunately translates to job cuts. With slowing drilling activity, the impact has been felt across the oilfield services sector as well. For instance, Halliburton has reportedly initiated layoffs in several business units, with reductions in headcount ranging from 20% to 40%. These layoffs are a response to rising costs, weaker prices, and increased volatility in the industry.
An executive at an oilfield services firm highlighted the challenges faced by the industry, stating, “The oil and gas industry has slowed dramatically due to low prices and increased cost of raw and finished material and supplies.” Operators are increasingly reluctant to utilize external services and are downsizing their own workforces as a result.
Another executive, this time from an exploration and production firm, expressed concerns over the potential impact of government policies on the industry. He noted, “The administration is pushing for $40 per barrel crude oil, and with tariffs on foreign tubular goods, [input] prices are up, and drilling is going to disappear. The oil industry is once again going to lose valuable employees.”
Overall, the industry is bracing for challenging times ahead as it navigates through a period of low oil prices and cost pressures. Companies are being forced to make tough decisions to stay afloat in a market characterized by uncertainty and volatility.
By Tsvetana Paraskova for Oilprice.com
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