Ensign Cuts 700 Jobs The first indication that onshore contract drillers are reducing staff has emerged.Offshore drillers, majors, and big oil service companies have all recently initiated rounds of layoffs.
Now Ensign Energy Services, a Canadian-based land drilling contractor, is laying off 700 workers in California, about 10% of its total workforce (credit to Tom Kirkman for first linking to the news on Oilpro). Ensign Energy Services is running about 26 land rigs in California, focusing on the oil heavy Monterey shale and San Joaquin Basin. Ensign employs a total of 6,790 people.
According to KBAK Eyewitness News in Bakersfield, the Employment Development Department showed 700 people to be laid off by Ensign Energy Services. Many of the pink slips were handed out to frustrated workers just before Christmas.
Local News Report On The Layoffs [Video Interview With Laid Off Worker]
When asked what he would do next, a laid-off Ensign employee interviewed by local TV station KBAK said: "Change of career, something more stable." To us, this statement sounds just like those issued by many laid-off workers in the 1980s. During that protracted downturn, many skilled workers left the O&G industry to pursue careers in industries they felt offered safer paychecks.
Depending on just how deep this downturn goes and just how many shell-shocked workers are handed pink slips, the oil and gas business could be setting up for another Great Crew Change in a couple decades.
California Rig Count Collapse
The cuts made by Ensign at its Bakersfield base call into question the outlook for drilling in California in the new, lower oil price environment. The laid off workers supported exploration and development drilling in California's prospective oil rich basins.
Once thought to hold 64% of the shale oil resources in the US, California's shale basins have recently been downgraded by the EIA. Earlier this year, the EIA cut its recoverable Monterey shale oil estimate by 96% (to 600mm barrels from 13.7bn barrels). Difficult / frontier oil basins with questionable recovery rates will be the first to be cut from exploration plans as companies adjust to $50 crude oil.
While we try not to read too much into drilling activity trends in December because of seasonality, it is worth noting that the California rig count was essentially cut in half in the last week of December. In the past 5 years, California has not seen a drop like this at the end of December, which suggests this collapse could be more linked to the fundamentals than holiday seasonality. The California rig count has not been as low as it is now (28 rigs) since 2010.
California Rig Count
chart credit - Bloomberg
About Ensign Energy Services
Canadian-based Ensign Energy Services derives 90% of its revenue from drilling and rig services. The company has 272 drilling rigs, 136 service rigs, 77 directional drilling kits, 96 frac flow back units, and 26 core rigs. Ensign employs a total of 6,790 people.
Operations are primarily centered in Canada and the United States (73% of revenue), but the company also operates in Venezula and Argentina in South America and Kurdistan, Libya, and Oman in MENA as well as Australia and New Zealand.