Originally created 10/06/01

Contractors cut jobs as demand for oil and gas rigs slide

TULSA, Okla. -- Early this year, when it seemed energy prices had no upper limit, Bob Pound couldn't find enough qualified roughnecks to operate his two drilling rigs.

Now, with natural gas demand leveling out and prices plunging in a softened economy, Pound says he doesn't know whether he'll have enough new oil and gas exploration jobs to keep a crew busy on just one rig for long.

"If work slows way down and we can't keep enough work for the men, we'll either sell it or park it across the road and leave it," said Pound, whose Bristow-based company alone has experienced a 40 percent drop off in drilling demand.

As prices and demand shot up, the U.S. oil and gas exploration sector created 10 percent more jobs over the past year. But as the boom makes its all-too-familiar transition to a bust, companies in the energy-rich regions of Oklahoma and Texas have begun laying people off, idling rigs or cutting overtime.

Danny Dorsett never expected to be laid off in September from an $18-an-hour job on a rig drilling for gas in the Anadarko basin of western Oklahoma.

"If I had known I was going to be laid off I wouldn't have bought a $35,000 truck," he said.

Precise figures on the number of layoffs to date are unavailable, but one closely-watched indicator of the industry's overall health is the weekly nationwide rig count.

The active rig count in the United States has slipped 11 percent since July to 1,141 Friday, according to figures from Houston-based Baker Hughes Inc., an oil field services company.

About three-quarters of U.S. rigs drill for natural gas, the heating fuel of choice for more than half of all U.S. households and basis of more than 15 percent of domestic power generation.

Richard Mason, publisher of the Land Rig Newsletter, said the current figure could tumble another 50 percent by the end of March 2002 - a downturn that would likely result in the loss of many of the jobs created in the past year.

"There seems to be a consensus emerging that the industry will experience a much greater downturn and it will last longer," he said.

Already, weak demand from industrial users and adequate supplies have made natural gas more than 50 percent less expensive than last year. The wholesale price of gas peaked briefly at $10 per 1,000 cubic feet in January, but has fallen dramatically since - dipping below $2 on the spot market, a 30-month low.

Crude is about 30 percent cheaper per barrel this year, falling precipitously after the Sept. 11 terrorist attacks.

A year ago, contractors struggled to find enough workers willing to return to the industry after getting burned by layoffs during a late 1990s slowdown.

Many workers returned, the average weekly rig count jumped 35 percent, and the U.S. Labor department noted a surge of 29,000 jobs at U.S. energy exploration and production companies to 342,000.

Oklahoma added 2,000 drilling and production workers in the past year, up 7.4 percent compared to 1 percent overall job growth. Texas oil and gas extraction companies hired 9,700, a 7 percent jump compared to 2 percent job growth statewide. Energy created a third of new jobs in Wyoming and boosted payrolls in Louisiana and other producing states.

But the trend is clearly shifting.

Producers are scaling back in western Texas and southeastern New Mexico, where the rig count dropped from a high of 250 this spring to 218 earlier this week, said Morris Burns with the Permian Basin Petroleum Association in Midland.

To the east, Patterson UTI Energy in Snyder, Texas, laid off more than 500 employees in recent months as demand fell for use of its 302 North American rigs, drilling mostly in Texas, Oklahoma and New Mexico, chief executive Cloyce Talbot said.

Houston-based Grey Wolf Inc. has laid off up to 150 in the past 45 days as more its 100 drilling rigs become idle, spokesman David Wehlmann said.

While producers are optimistic that gas prices will rise higher again, perhaps as early as next spring, many admit they were caught off guard by the rapid decline in the past nine months.


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