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Will the Workers Come Back?

If you are a BTU client or have had a recent meeting with anyone on our team, you are acutely aware that we have a concern over service companies’ ability to ramp up staff in order to meet the needs of an ever-growing backlog of wells in the Permian.  This, however, does not appear to be an isolated issue on a regional or skill-level basis.  While we have spent a lot of time discussing the inability to keep up from a completion perspective, the labor market, in general, seems to be near tapped-out for oilfield workers.

If we consider unemployment from a nationwide perspective, we begin to see part of the problem.  Unemployment has been cut in half over the past 5 years.  When unemployment was nearer 8% and oil was $100, it was much easier for service companies to recruit out of state employees and pay the necessary wages and travel expenses to get them to places like North Dakota.  Today, West Texas is the new North Dakota and $60 WTI is the new $100.  As margins at the top shrink, the trickle-down effect is palpable.   Another challenge is a psychological one as many of the workers that would typically be called upon to fill the need have been through a couple of nasty down-cycles and are more hesitant to take the gamble again.

As is always the case, one man’s lemons are another man’s lemonade.  Discussing this situation with friends and colleagues who own service companies, how merry your holidays were depended on how well you fared through the downturn.  Companies who could maintain a strong staffing level are now reaping the rewards of weathering a couple of tough years as service costs are nearing, and at times surpassing, pre-bust levels.  For more general oilfield service companies, just hiring and keeping truck drivers is incredibly difficult.  Thus, if you were able to keep your staff together through 2015 and 2016, and can now avoid having them stolen by your competitors, the world is your oyster.

The lack of labor availability is one of the many topics that BTU will cover at our upcoming What Lies Ahead conference being held on February 22 in Houston, TX.  Register now before prices go up in the new year.

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Mason Ender is a partner at BTU Analytics, LLC and Chief Operating Officer. Prior to joining BTU Analytics, he was the Manager of Sales for Bentek Energy, a division of Platts. Mason has worked with energy companies both domestically and internationally to implement effective fundamental energy analytic solutions. Mason also routinely presents energy market dynamics informing the market of upcoming risks and opportunities.

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