As president and CEO of Red Deer’s Predator Drilling Inc., Shane Walper spends a lot of time in Calgary. He says the steady decline in oil prices over the past nine months has created a mood of “doom and gloom” in Canada’s oil and gas capital.
“There are literally thousands of people who have been let go,” said Walper, adding that the carnage extends beyond Calgary to communities across Alberta — including Red Deer.
Predator has had to cut its rig crews “a lot,” he confirmed, with about 20 per cent of its office staff also affected. Those who remain have taken wage cuts.
And Predator is one of the luckier oilpatch companies. It did a significant cost restructuring before the downturn, has good access to capital, and carved out a niche of “pre-setting” wells with small drilling rigs — which gives clients a cost-effective alternative to using large rigs during the early stages of drilling.
Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors, offered some insight into how other drilling companies are doing.
“We’re sitting at about 19 per cent (equipment) utilization and we had the worst January on record and we’ll have the worst Quarter 1, probably since 2009 and possibly all the way back to the ’90s.
“I think at the end of the day, the best way to describe it is that companies are just trying to survive.”
Unlike the highly publicized cuts of salaried staff by major energy companies, drilling companies are quietly idling their rigs. And when that happens, the men and women who operate them don’t get paid, pointed out Scholz.
“For our crews, it’s upwards of 4,000, 5,000 people who aren’t going to be working.
“They’ve got bills to pay, mortgages, car payments.”
The picture isn’t any better on the service side of the industry, said Mark Salkeld, president and CEO of the Petroleum Services Association of Canada.
“There are layoffs going on; there are wage rollbacks,” he said.
“Right across the board, from Weyburn, Sask. all the way through to Red Deer, Grande Prairie and Fort St. John. It’s tightening up.”
The latest survey by employment consulting company ManpowerGroup found that Western Canada’s mining sector — which includes oil and gas production — had the most pessimistic hiring intentions since analysis of the sector began 11 years ago. And among the 11 Western Canadian cities included in Manpower’s employment outlook for the second quarter, Red Deer employers had the lowest expectations.
“Red Deer has been known historically, and again at this time, to be impacted by oil prices, recognizing the great support that is provided by Red Deer (such as servicing companies) to the oil industry,” said Randy Upright, Manpower’s CEO for the Alberta region, in an email to the Advocate.
Upright said his company is working with displaced workers and also employers affected by the downturn.
Charles Strachey, a local manager with Alberta Human Services, said staff at Red Deer’s Alberta Works Centre have noticed a “slight increase” in the number of energy sector workers coming in for help. But postings at the centre for oil and gas jobs have dropped significantly, he added, and no energy companies have registered for this Wednesday’s Central Alberta Career & Job Fair.
Salkeld, who’s worked in the oilpatch for decades and seen his share of downturns, is encouraged by one thing. Companies are doing everything they can to avoid layoffs: reduced work weeks, wage rollbacks, elimination of bonuses, creative vacations, work furloughs and job reclassifications.
That reflects the high value that employers in the oil and gas sector now place on their skilled workers, he said.
Walper said he’s also seeing a spirit of co-operation among companies. Price reductions are being requested, and granted, up the supply chain.
“It seems like everybody’s really banding together.”
The industry will eventually bounce back, everyone agrees. But Salkeld and Scholz worry about the long-term damage being inflicted by the current deep downturn.
“This industry already has a bad reputation for retaining people, and with this slowdown and these layoffs, we’re going to lose intellectual capital,” said Salkeld, recalling how the combined payroll of PSAC companies fell from about 72,000 to 52,000 during the 2008 recession.
“We had guys who up and left the industry and they never came back,” added Scholz.
“This is going to be a huge loss for the Alberta economy when it turns around.”
With oil prices showing no signs of recovering, Walper is trying to remain as optimistic as he can.
“The visibility going forward is very poor, but I think it’s so important to maintain a positive attitude.”
That’s tough to do, said Scholz, especially with some industry experts predicting that depressed prices could remain the norm for several years.
“We’ll see what’s left if it’s that long,” he said. “There would be a lot of collateral damage on the streets.”
Salkeld offered a similar warning.
“If this slowdown is prolonged, it will be a different business landscape. There will be mergers and acquisitions, there will be bankruptcies, there will be all sorts of things going on.”
hrichards@www.reddeeradvocate.com