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More Job Losses Coming To U.S. Shale
Submitted by Gaurav Agnihotri via OilPrice.com,
With the recently concluded nuclear deal between Iran and the P5+1 countries, oil prices have already started heading downward on sentiments that Iran’s crude oil supply would further contribute to the already rising global supply glut. The economic crisis in Greece, OPEC’s high production levels and China’s market turmoil have created more pressure on oil prices, making a price rebound look highly unlikely in the near future.
So, with the prices of both Brent and WTI moving towards $50 per barrel, the short to medium-term outlook for oil remains mostly bearish. This is bad news for the U.S. shale sector which is already dealing with rising debt and the ever-increasing risk of default.
A recent Bloomberg report stated that U.S. driller’s debts stood at $235 billion at the end of first quarter of 2015, which is quite worrying. Does this mean that the U.S. oil sector is likely to witness a lot more layoffs than we have seen so far? Surprisingly, a recent IHS study had revealed that the U.S. shale sector has been boosting job creation in addition to supporting around 1.7 million jobs in U.S.
All this as the overall unemployment rate in U.S. has been declining since previous years. But with rising negative sentiment pertaining to oil prices, is U.S. the shale sector prepared to face one of its biggest tests yet? Will the industry be able to sustain another long period of low oil prices or will it once again resort to trimming its workforce?
Low oil prices will most likely result in more job losses
Since the oil price collapse of last year, we have seen how oil field services and drilling companies have slashed thousands of jobs in order to reduce costs and cut their operational spending. Some of the major oilfield companies like Schlumberger, Halliburton and Weatherford have already announced close to 20,000 layoffs as of February 2015.

However, the markets turned bullish when oil prices were hovering in the range of $60 per barrel during the last two months, raising hopes that oil companies would be sending close to 150 drilling rigs back into operation.
Now that oil prices are again moving towards the $50 per barrel mark, high drilling costs make almost a third shale oil in the U.S. too expensive to produce. Even Goldman Sachs has admitted that the $50 per barrel oil price level would deter any kind of a drilling recovery in U.S. this year, as there would only be around 20 to 50 rigs returning to work by end of this December. In fact, analysts from Goldman predict WTI will fall to $45 a barrel by October this year.
“Oil rebalancing remains in its early stages with the current cash flow and funding mix stalling it, we believe that as fundamentals reassert themselves and we move past the seasonal peak in demand, oil prices will continue to sequentially decline,” said analysts from Goldman Sachs.
U.S. shale sector faces another challenge as hedges expire
The U.S. shale industry had been somewhat insulated from the effects of low oil prices in the past as companies had hedged their production. This meant that companies had fixed their future selling price in order to temporarily circumvent the ongoing volatility in the oil markets. Since most of the companies had hedged their production before the last oil price crash, they were well protected from the erratic oil price movements. However, the situation is quite different now as most of these hedges are about to expire. For small and medium shale companies that had hedged their production at $85 or $90 per barrel previously, having more of their production exposed to $50 per barrel prices will be painful.
What to expect over the coming months
The coming few months will prove challenging for the sector, and some small and medium U.S. producers may start missing their debt repayments or even file for bankruptcy. Quicksilver Resources and American Eagle Energy are two of the six U.S. based companies that have filed for bankruptcy in 2015 so far. Sabine Oil and Gas Corp. is the latest, and the biggest, U.S. producer to file for bankruptcy so far.
Even mergers and acquisitions have slowed down considerably for the U.S. oil and gas industry in 2015. If the present trend persists, companies will have no choice but to cut their workforces even further to remain competitive and reduce their rising overheads. If oil prices remain in the range of $50 per barrel for longer than expected, even big operators such as Exxon Mobil, Chevron and ConocoPhillips (who have so far not made any major layoffs) could start downsizing their workforce.
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Doesn't matter. Just buy. Don't think. Buy.
Tin solders and Iranian oil tankers coming...we're finally on our own.
If you've got a $100 oil derivative contract.....you'd better get the hell out of it.
... rumour says BofA panicked and laid off three congressmen and one senator ...
If true.....that would be a serious development.
Any word as to who they are.....did you hear McCain's name?
Wonder how this affects all those $25/hour Wal-Mart jobs in North Dakota?
Ed-Zackery! Just but stawks, no need to think!
Thinking requires effort and effort requires energy and that may be hard and something that's hard to do is not fair.
So sit back, buy stawks and keep tabs on the girl with the jumbo sized ass, along with the rest of her freak show no talent family.
It's the new Amerikan dream!
FUBAR!
'You don't need to think, it's all laid on for you here.'
Just for fun...note that $235 billion divided by $50/barrel means that 4.7 Billion barrels of oil has been 'pre-sold' to the debt holders alone...and that's without any interest payments.
Ummm...also for fun we might note that the total proved reserves of these companies is pretty close to that same number so....what exactly are all those shale-driler equity holders hoping to receive?
Hopium sure does command a stiff premium these days....
Come and listen to a story about a man named Jed A poor mountaineer, barely kept his family fed, And then one day he was shootin at some food, And up through the ground came a bubblin crude Oil that is, black gold, Texas tea.
Well the first thing you know ol Jed's a millionaire, Kinfolk said "Jed move away from there" Said "Californy is the place you ought to be"
So they loaded up the truck and moved to Beverly Hills, that is. Swimmin pools, movie stars....
They haven't added the current losses to the BS data so does it even matter that this point?
This was the transitory part of the economy the troll was taling about yesterday? Well, if oil flows in cheaper from Iran, this is not transitory, it will be permanant!
Heading for the $49 handle as we write.
Matt Taibbi should be beaming from to ear to ear.
So what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physical commodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.
http://truedemocracyparty.net/2013/07/4-per-gallon-gas-bubble-matt-taibbi-secret-us-govt-goldman-sachs-deal-raises-gas-prices-barack-and-the-sheeple/
That's some skill. The moment you posted about the $49 handle it became airborne and went above $51.
It's the QE cash rescue fund.....we have lots of it.
This will teach Russia a lesson!
Rising overheads? I'm not sure this is an inflationary environment for the oil business.
Sabine Oil and Gas filed for Bankruptcy protection this week!
Iran deal fantastic for US consumers filling up there tanks. Bring it on.
Milagro filed yesterday.
http://www.wsj.com/articles/milagro-oil-gas-files-for-chapter-11-bankrup...
Layoffs in this industry come and go, how do these numbers measured up against "normal" seasonal/market layoffs?
Found this: http://data.bls.gov/timeseries/CES1021100001?data_tool=XGtable
I would not lay off a knowledgeable labor force and let these guys go off into the wild unless the end was near or passed.
ARNOLD......you and wouldn't....but how about the over paid psycho running the company.....remember, he has his money, not so much the worker bee
Oil down 50%,the price at the pump down 20%..All this is,is more central planner market manipulation,to transfer profits from oil companies,directly to bankrupt state coffers,with the banksters skimming a hefty percentage off the top..Someones going to have a lot of explaining to do,if oil ever goes back to $100 a barrel,and regular unleaded gas is $6.50 a gallon..
Guess I'd better swing by the bank and deposit that $50 royalty check from Sabine that came this week. Hot chance that it will ever pay.
They already have another horizontal well permitted to go under my property. While I was signing the production sharing agreement last month, I was wondering where the money was supposed to come from to drill and frack. Most likely, they were building up another paper asset for the bankruptcy filing.
$50 oil makes drilling too expensive for only 1/3 of shale producers? I don't remember seeing much proof of positive cash flow when oil was $100.
This is just another ponzi with banks underwriting future unicorn profits. It's being propped up like everything else because once one card goes the whole deck may go.