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Across American oilfields, layoffs and auctions
Convinced he can ride out the slowing fortunes of America’s oil and gas industry, Shawn Kluver arrived at Thursday’s heavy equipment auction with money to spend and bets to make.
Kluver flew to Colorado from North Dakota on a one-way ticket, confident he’d find bargains to drive home.
“Everyone says we’re crazy, but we’re hoping to capitalize on the downstroke,” he said, walking around the sprawling, dusty auction site, where more than 3,000 bidders haggled over backhoes, bulldozers and the trucks he was shopping for, called hydro excavators.
Used oil field equipment is a bargain these days. Hundreds of drilling rigs across America are being shut down by oil companies facing low petroleum prices, putting tens of thousands of roustabouts, drillers, mudders and truckers out of work and idling the equipment used to prepare the ground. But in this downturn, just as in others, someone’s pain will someday be another’s gain.
The fall has been fast: The price of a barrel of the benchmark U.S. crude known as West Texas Intermediate closed at $43.96 on the New York Mercantile Exchange Friday, down more than 50% from a year ago.
At the Ritchie Bros. auction here, bidders in jeans and Carhartt pants clutched rolled-up inventory catalogs, consulting with partners and wives and bankers by phone before staking their place in the company’s auditorium where auctioneers rattled off bids for a seemingly never-ending stream of rumbling diesel engines that totaled $23 million in sales. Ritchie Bros., which bills itself as the world’s largest auctioneer of heavy equipment, says it’s seen record-setting interest in its auctions this year, driven in part by contractors seeking bargains on oilfield equipment that can be repurposed for construction.
On the block at its Longmont auction Thursday were more than dozen hydro excavator trucks, which use high-pressure water to clean drilling rigs and probe for buried utility lines near wells. Many of those trucks came from Decatur, Texas.-based H2X, which laid off 60 employees and shut down in February after oil companies stopped calling them for work, said former CEO Mike Clark.
“I don’t know how much they sold for, and I don’t really want to know,” Clark said Thursday by phone from Texas. “The oil and gas companies pulled in their horns really fast. Everyone I talk to, they’re stunned at how fast everybody reacted.”
The oil and gas industry hasn’t collapsed entirely. Thousands of rigs are still boring into the earth, and many workers are still benefiting from rig jobs that can pay about $100,000 annually, according to Rigzone.com, an industry job and news site.
But a major slowdown is well underway.
Nationally, last week’s count of active U.S. drilling rigs was down 40% from the same week a year ago, according to industry expert Baker Hughes. The number fell by 56 from the previous week, with 1,069 operating as of Friday, Baker Hughes said.
The reductions are the most significant drop in drilling since 2008, said Tim Hess, a short-term energy outlook analyst with the U.S. Energy Information Administration. Hess said oil companies are reducing drilling because there’s an oversupply of oil across the world, which is driving prices down.
In the United States, many oil companies have hydraulic fractured, or fracked, their wells, which allows them to extract oil and gas from previously unprofitable areas, helping supercharge the American oil boom. Hess said companies are finishing the wells they’re already drilling, but are only starting new ones in areas they think will be most profitable. That will lead to production declines and potentially rising prices by this fall, he predicted.
Federal energy analysts predict “very high uncertainty” about oil prices over the coming months, with December 2015 futures for West Texas Intermediate crude oil trading between $32 and $108 a barrel.
While oil prices and production levels remain uncertain, people are already losing their jobs.
Halliburton, one of the country’s most recognizable oilfield service companies, last month announced that it will cut up to 8% of its overall workforce, or approximately 5,200 to 6,400 jobs. Baker Hughes in January announced layoffs of about 7,000 people, or 11% of its workforce. Shareholders of the two companies are voting on a proposed merger on March 27. And Schlumberger, another oilfield services company, announced in January it was laying off 9,000 people.
Kluver, the hydro excavator buyer, knows all that. He still laid down $142,000 to buy two of the trucks, which he and a colleague planned to drive 10 hours home to Kildeer, N.D., as fast as possible. The trucks can also be used to clean out carwashes and industrial kitchens, and Kluver plans to keep busy until the higher-paying oil industry again comes calling.
“It will come back eventually,” he said. “But it will weed out a lot of people first.”
15 Comments on "Across American oilfields, layoffs and auctions"
hiruitnguyse on Sun, 22nd Mar 2015 2:06 pm
Another hick loses his life savings.
rockman on Sun, 22nd Mar 2015 2:50 pm
“Thousands of rigs are still boring into the earth”. Thousands imply a minimum of 2,000 rigs drilling. Idiots contradict themselves in the same breath. Can’t even compose at the 4th grade level. LOL.
Perk Earl on Sun, 22nd Mar 2015 3:12 pm
I would have watched the video but just after clicking to avoid an ad, and after 5 or so seconds of actual footage they dove into a Walmart ad. I’m not watching videos to watch ads.
But I get the gist of the article; lots of stuff to sell cheaper than usual. Guess those buying are doing so guessing future oil price will rise enough to make those deals a good buy. But what if they don’t?
shallow sand on Sun, 22nd Mar 2015 5:04 pm
Note article states much of the equipment is being purchased for non oilfield use. Video points to hydro excavation trucks cost $500,000 new and buyer interviewed picked up two of them for $142,000. Assuming he has a use for them, pretty good buy.
On the other hand, if this bust is a long lasting bust and rig count goes back to the historic 200-400, I assume a lot of rigs will be taken apart and scrapped, or will just lay in the weeds until the next boom, when someone will drag them out refurbish them. The oil and gas specific stuff will become tough to sell at any price.
I think the quote from the former CEO of the company who had owned the trucks is telling. The speed at which this is crashing is something to behold, probably more severe than even 1986. Keep in mind most of the rigs have been pulled out of the field since Thanksgiving. Just 4 months and half of a post 1980s high have been lost.
Plantagenet on Sun, 22nd Mar 2015 5:21 pm
The bad news is that 70,000 people have been laid off in the oil patch due to the oil glut.
The good news is that the BLS is saying only 2000 have been laid off.
steve on Sun, 22nd Mar 2015 8:00 pm
For each of those jobs there is probably 2 more attached that will be lost as well.
Makati1 on Sun, 22nd Mar 2015 9:16 pm
Steve, you are correct. 100,000 laid off = 1,000,000 who lose some, or all, of their income. All of the ‘support staff’ of the system number more than the actual rig workers. Short would have a better handle on it than I do, but it much be at least 10:1 down line. Everything from the pipe manufacturers to the lady that cleans the apartment would lose income.
dave T on Sun, 22nd Mar 2015 10:48 pm
The US oil bust in fracking extraction goes to show how short sited and greedy humans are in the long run and that humans are incapable of rational thinking.
Davy on Mon, 23rd Mar 2015 5:30 am
Makster, if your comment could only be an isolated North American issues how wonderful for you and your fantasy of an Asian Phoenix. In reality with all the stuff coming from Asia to the US this is going to shave some growth off already dismal growth in Asia. You best not hope the gods answer all of your prayers. We know you have your voodoo alter in your room for a North American collapse.
Asia is very close to a downward cycle that will leave it hungry for resources to support 4BIL. There is no decouple of the global for even a moment. One of these days when the 12MIL souls of Manila are in chaos from a descending global economy you are going to ask yourself “Where is the Asian Phoenix?” and “We were supposed to be a 1000 year Asian Reich” “I thought when the west collapsed we Asians would take over”. At that point you are going to be afraid to leave your 10th floor apartment but have to with your stomach growling.
fred1 on Mon, 23rd Mar 2015 6:11 am
Hey Davy I think you should cut back on the personal attacks on the Makster
Davy on Mon, 23rd Mar 2015 7:53 am
Fred, can explain yourself. Who are you to think I should without some kind of explanation? If you run this site I will say ok this is your site if not then why should I care about what you think without a coherent explanation?
You then could ask yourself is my comment fair and balanced? Do you know the history between the Makster and I? Do you realize he has made serious attacks on me personally by claiming an Asian screwed my daughter?
Do you realize this is a clash of identities and a search for the heart and minds of out global people in our small little way on this forum? This at a time that may be the end days of BAU. Are you saying what you did because you are a fellow agendist that is anti-American who supports Mak’s lies? Maybe you are just a politically correct kind of guy that wants everyone to be happy without conflict a warm and cuddly chap. Maybe still yet you are an asshole enabler.
I have asked the Makster to moderate his message and that is all. I ask him to respect me and refrain from constant anti-American attacks that directly reflect on me, my family, and my people.
While you are at it Freddie what about the attacks on Planter? Are those ok because you like the Makster but could give a shit about Planter? There are proportionately more attacks on planter than the Makster by me.
I suggest you organize a group to establish by-laws for commenting and elect a moderator. Otherwise I have learned it is best to mind your own business. I do not get involved with the other fights on this forum. I suggest you do the same.
marmico on Mon, 23rd Mar 2015 9:15 am
Otherwise I have learned it is best to mind your own business.
ROTFLMFAO
Freddie Fluff Stuff:
It will be nip and tuck whether the first three months of 2015 will be the lowest ratio of U.S. gasoline expenditures to wages in the last ten years. The data set may strike four pennies per dollar!
marmico on Mon, 23rd Mar 2015 9:17 am
Ooopsie, the Freddie Stuff Fluff link.
http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1577
Davy on Mon, 23rd Mar 2015 9:26 am
Marmi, thanks for the support. That means a hell of allot from someone of your caliber or should I say calibration. You brightened my day.
BobInget on Mon, 23rd Mar 2015 12:31 pm
If anyone here believes oil is somehow ‘going out of style’ see a therapist.
As a recovered day trader my old mantra during times like these reads; “I guess we won’t be needing oil tomorrow”.
Note how the article subtlety contradicts itself. (most equipment is being purchased
for construction) What does that tell ya?
Notice that short interest (in oil) is greater
today then ever. This is bullish for
oil prices. Apparently, inexperienced traders
are making big bets oil is going lower.
Trust me on this. WHENEVER futures contracts swing greatly in one direction,
so called ‘big guys’ take reverse positions.
I learned this form master traders.
“The futures markets are all about fucking over as many people as possible”.
Bottom line, Shawn is smart to pick up equipment below market.
Shawn’s dad may have been a rich farmer.
No farmers get rich, until they sell out.
Why? because they all want the latest fanciest, shiniest equipment Deer or Cat
have on offer.
Rich farmers always buy older equipment at that same auction where last year’s failed farmer’s not quite so new equipment is on offer.