Three years ago, when crude prices still floated above $100 a barrel and the nation’s oil fields were booming, Clint Concord could hire 20 new workers a day here in the West Texas oil patch to meet the constant demand from his production company clients.
But today, with the Permian Basin booming again, Concord said he’s lucky to find one qualified candidate every two days to keep up with the work. Concord, a senior operations at Byrd Oilfield Service, estimates his company is losing $7,000 a day because it still doesn’t have enough truck drivers to deliver equipment to its crews.
“Some people got smart and got out of the oil field,” Concord said. “They’re finding other career paths because they can’t handle the inconsistency of it.”
The oil bust that wiped out scores of companies and tens of thousands of jobs is still weighing on the industry more than 18 months after prices hit bottom in early 2016, its brutal memories contributing to a labor shortage that is slowing the energy recovery. From small companies like Byrd to global giants like Houston’s Halliburton, the oil field services companies that drill, frack and haul equipment, supplies and wastewater are finding far fewer people willing to work for a boom-and-bust industry.
The shortages are frustrating oil producers and disappointing investors and analysts who had expected the surge in drilling activity that has followed rising oil prices to yield more crude and more profits. Oil executives, meanwhile, have deeper fears that the difficulty hiring is a harbinger of long-term consequences that could hobble the industry for years – or decades – to come.
The precedent is the epic 1980s oil bust, which drove a generation away from the oil industry, leaving a workforce gap that companies are struggling to fill. In recent years, companies have grappled with the challenge of replacing retiring workers in their 60s with a new generation largely under 35, without midcareer employees to aid the transition.
Even in the prolific West Texas oil patch, it’s as if thousands of workers have disappeared – an eerie echo of 30 years ago. Bandy Watkins, a salesman at energy service company Pinnergy in Midland, has posted ads on social media, put up flyers in truck stops and paid for ads on radio stations and local newspapers in the search for truck drivers. But he hasn’t found nearly enough to hire.
“I don’t know where they went,” Watkins said. “Finding fracking truck drivers is now extremely hard.”
Halliburton has hired hundreds of workers in West Texas this year to meet demand for hydraulic fracturing services, but even the largest U.S. fracking company has had to look beyond Texas to replenish a workforce that was decimated by years of cheap oil prices. The company holds job fairs in places like Alabama, Mississippi and Nevada.
“We have a real bottleneck with people out here,” said Chris Gatjanis, who runs Halliburton’s operations in the Permian. “When the market fell, we reduced our head count. All of us did. Some of those people didn’t come back to the industry. They were burned and hurt. It takes a while to build that back up.”
Halliburton and its oil field services rivals Schlumberger and Baker Hughes cut more than 100,000 jobs worldwidebetween them as oil prices fell in 2015 and early 2016. Since the middle of last year, as crude prices and drilling activity recovered, oil producers and service companies have hired around 30,000 workers in Texas, after cutting more than 100,000 oil field jobs across the state – roughly one in every three such jobs – between December 2014 and July 2016.
Drilling has surged in the Permian Basin this year, but the shortage of workers for 50-person fracking crews has led oil companies to leave hundreds of wells untapped for months in West Texas. The number of dormant wells in the Permian Basin has climbed from 1,310 in June 2016 to more than 2,400 last month.
Analysts blame a lack of available labor and fracking equipment in West Texas, where the bulk of the oil industry’s nascent recovery has occurred this year. The unemployment rates of Midland and Odessa, two Texas cities at the heart of the Permian Basin, have fallen from 4.9 percent and 6.8 percent, respectively, in June 2016, to 3.2 percent and 4.3 percent in August, according to the Labor Department.
“The labor pool has been completely plundered,” said Bill Herbert, an analyst at Simmons & Company International in Houston. “Growth expectations are being recalibrated.”
The oil industry’s ongoing recovery began in an economy with a low unemployment rate and far less spare labor than after the financial crisis in 2009, when the nation’s first shale oil boom began. To lure workers from out of state, Halliburton and its rivals are raising wages, offering housing allowances and providing temporary homes, known as man camps.
All of this, however, is increasing labor costs that will soon eat into companies’ bottom lines, ultimately slowing investment and further weighing on the recovery, analysts said. So far, prices for various oil field services have risen between 15 percent and 25 percent in the Permian Basin, but those prices will have to continue to increase to get workers back into the oil patch.
CUDD Energy Services, a hydraulic fracturing firm in Midland, took several months to fully staff its fracking crews after idling about half of the pressure pumping equipment used in hydraulic fracturing during the oil downturn.
“Right now, we’ve got more demand for frack crews than there are frack crews,” said Clint Walker, general manager at CUDD. “Everybody’s trying to hire as fast as they can to meet demand. But the manpower isn’t there yet.”
In December 2014, at the peak of the oil boom, the average wage for an oil industry worker in Texas was $1,276 a week, according to the Texas Workforce Commission. That dropped to a low of $1,047 a week in March 2016, the month after crude prices reached a 12-year low at $26 a barrel. Last month, with prices around $50 a barrel, those wages had rebounded to $1,206 a week.
“Labor is an issue,” said Claire Harvey, a principal on the energy investments team at private equity firm Pine Brook Partners in Houston. “And prices are going up.”
Another shortage in the oil patch: working fracking equipment. During the downturn, scores of oil field services companies cannibalized their idled equipment for spare parts, instead of repairing the equipment that was working in the oil fields. Across the United States, there’s enough demand for fracking equipment totaling 14 million to 18 million hydraulic horsepower. But there’s only 12 million hydraulic horsepower available today.
Just about every kind of oil field tool is in high demand, and there’s a limited supply in the Permian Basin, said Paul Madero, who oversees Permian Basin operations at Houston oil field services company Baker Hughes, which is now controlled by General Electric Co. of Boston. Thomas Rinald, president of Aim Direction Services, a drilling services company in Odessa, said for months his company couldn’t find enough of a certain motor used to power drilling in working condition.
“The entire supply chain has been challenged,” Madero said.
Across the oil patch, trucking companies said it has become much harder to find enough commercially licensed truck drivers in West Texas to keep up with rising demand for hauling sand and oil field equipment. In short supply, some of these truckers, particularly those with years of experience, can make as much as $4,000 a week – $200,000 a year.
Next month, the shortage of drivers could worsen. The Department of Transportation will begin requiring truckers to use electronic logs to keep track of the time they spend on the road and idled – a rule that will make it harder for truckers to work beyond certain driving time limits. Many veteran drivers, who would likely earn less under the new rules, are expected to retire.
“You’ll have fewer trucks, as far as hours go, and higher demand,” said Chris Welcher, safety director at Horizon Transportation, a frack sand trucking company in Midland. “We’ll need more truckers, and at some point it’ll have to affect the oil companies. Companies are going to say: ‘There’s a shortage. I’m going up in price.’ ”
This first appeared on the Houston Chronicle – an Energy Voice content partner. For more click here.
