Rig Count Surges Again To 16-Month Highs (But Where's The Oil Industry Jobs)

Tyler Durden's picture

For the third week in a row, the US oil rig count rose dramatically (up 15 to 583 - the highest since October 2015). This is the biggest 3-week surge in rig counts since April 2013... (the biggest 3-week percentage gain since Nov 2009)


Production continues to trend with rig count...


However, as exuberant as this number is, job gains are nowhere to be found as the robotization of the industry (amid more 'real' costs of capital) provide no help to Americans...

As Bloomberg notes, the addition of just 100 jobs to industry payrolls lags well behind the pace of the overall U.S. economy, which added 227,000 workers during the month. The growing use of robots and other efficiencies honed over the course of a 2 1/2 year market downturn means more work is getting done with fewer people. Confirming previous fears that robots are repacing roughnecks.

The inevitable advance of technology and automation has upended industries such as car manufacturing and food processing. Now robotics is making its way into the oil fields by helping drilling activities and putting together heavy pipes.

For companies, more automation would mean higher efficiency, safer operations, and ultimately, lower drilling and production costs. For oil rig workers, it would mean that part of the jobs lost during the oil price downturn would never return. Also, part of the new job openings would require a different type of skill set: for example, information technology and advanced computer skills.

But even if automation is expected to increase, and some day take over drilling sites and drillships, it is not the norm in the oil and gas industry today. While there have been early adopters, the oil and gas drilling business is still years away from becoming an automated activity.

Companies that had been lavishly spending on drilling at oil prices at $100 per barrel were too busy pumping oil and gas to think of efficiency and production costs. But the oil price bust has squeezed their budgets, and the firms are now seeking to cut costs while increasing efficiency.

Apart from reducing the human factor in drilling such as shifts or fatigue, or work-related accidents and incidents, automation can reduce headcount costs.

Automated drilling rigs may be able in the future to reduce the number of persons in a drilling crew by almost 40 percent, from 25 workers to 15 workers, Houston Chronicle’s Jordan Blum writes, quoting industry analysts.

Drilling company Nabors Industries expects that it may be able to reduce the size of the crew at each well site to around 5 people from 20 workers now if more automated drilling rigs are used, Bloomberg’s David Wethe says.

However, a sensitive issue such as workforce in an industry that had slashed a couple of hundred thousand jobs during the downturn has just become even more sensitive with the new U.S. administration.

“The Trump Administration will embrace the shale oil and gas revolution to bring jobs and prosperity to millions of Americans,” President Trump’s America First Energy Plan states.

So companies are likely to keep a low profile on how much staff costs they would be saving.

“They’ll more likely brag about the automation rather than these head counts,” James West, an analyst with investment bank Evercore ISI, told Bloomberg.

Automation is also likely to drive small-sized subcontractors doing jobs for larger companies out of business.

Although it is expected in the not-so-distant future, automated rigs will not be replacing en masse human workforce this year or next. Right now, there are many conventional under-utilized rigs, especially in offshore drilling, where companies had slashed exploration and drilling expenditure.

In land drilling, activity in the U.S. oil patch is picking up, and employment has recently shown the first signs of gains after more than two years of declines.

Total job growth in Texas is expected to rise from 1.6 percent in 2016 to around 2 percent in 2017, Dallas Fed assistant vice president and senior economist Keith Phillips said earlier this month.

“Job growth picked up in the second half of 2016 due to a stabilization of the energy sector,” Phillips noted.

Part of the jobs lost over the past two and a half years may never return due to increased automation, but the recovery of U.S. drilling may send companies hunting again for staff this year.

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Looney's picture


We also need “Rig Count” on all government departments, starting with the BLS. Oh, and the Fed, too.  ;-)


So Close's picture

Just a quick note from Texas here.   I work in the oil and gas industry on the drilling side, and though I agree with much Tyler writes this premise of ghost rigs with no hands working them is straight up bullshit.

Joe Davola's picture

In southwest PA, I think there may be some pickup in shale drilling - I see more support type vehicles on the roads (white pickups with a logo slapped on the side and a slurry/liquid hauling tank in the back).  During the height of the shale boom, the drillers would house the workers at local hotels, then run buses to the well sites.  Hadn't seen any of those buses for a while, until a few days ago I saw one near some of the hotels in my area.

Son of Loki's picture

I have a friend in Big H and they are hurting badly from Obama's destruction of the energy industry. Hundreds of thousands fired. Since 40% of the Houston's GDP is energy, that's a big hickey. he said even far out suburbs like Katy and Conroe are feeling the impact with commercial RE at record high vacancies---totally empty office buildings sitting vacant along the "Energy Corridor."

So Close's picture

To be fair... it wasn't all Obama.  It was mostly regular ole oversupply in the face of anemic world growth/demand.  

jcdenton's picture

It was the Bushes ..


It has always been the Bushes ..


With a little help from their minions at GS ..


Q: in the following video. Does Rubin follow Bush, or does Bush follow Rubin?




The most current news ..





BTW, I live in Houston ..

My dad was born here ..

He died here last year ..

Grew up in the ship channel ..


I have worked in the oil/gas patch ..

I work in information technology ..

I have gotten my hands dirty ..

I can also fix your computer ..

SimplePrinciple's picture

Notes from Midland trip this week:  The motel I stayed at was awash in muddy-boots-outside-the-room, hit-the-breakfast-buffet-at-six, brawny roughnecks.  Rooms were available, though.  Weekday motel rates are down to around $100/night from hundreds higher in the fairly recent past.  I also saw that the amusingly named "Genuine Country Living" trailerpark in the barren wasteland east of town only had a couple dozen trailers packed together.  They appeared modern and functional, but obviously not intended for anyone with leisure time.

Conclusion from trip?  I think the workers are working long hours and probably raking in the dough.  I didn't see any outward signs of new hiring.  I did see some outward signs of stress/overwork/exhaustion.

gatorengineer's picture

Crude comments about Rigged Data.....

Dragon HAwk's picture

Or it could be Mom and Pop small organizations doing their own work keeping things small trying to stay in business on a shoe string, paying under the table for a bit while their people stay on unemployment. dodging bankers repossession and such.

NoWayJose's picture

Uhhh, those would be considered Trump jobs - with good pay - so they cannot be reported!

Feel it Reel it's picture

If the workers are 1099 independant contractors then there would be Zero employees....

innertrader's picture

FROM THE OIL PATCH:  I have physcially noticed that NEARLY ALL of the new oil wells I see being drilled over the last year or two, are VERY DEEP WELLS!  I believe that I am seeing the smart money drilling these deep wells while it's cheaper to drill.... but that's simply my observation and I have NOT researched it!  Would like to see a response from someone that KNOWS!



Snaffew's picture

Fracking wells have a production life expectancy of about 1 year.

Snaffew's picture

Trump's Plan...assign SS numbers to robots---make them tax exempt because of health issues---low or absent pulse.

PodissNM's picture

Since most employees in the industry aren't employed directly in drilling actual job growth would naturally come after the growth in the rig count. Months or years later in some cases.

adr's picture

Well if the NanoFlowcell is real and works as advertised, we won't need rigs much longer and Tesla will be out of business within a month of the car launching.

In a few weeks the production car is supposed to be shown in Geneva. I hope it's not vaporware.


SmittyinLA's picture

Obamacare made rig automation mandatory 

Energy isn't supposed to be a "labor intensive job"

Sapere aude's picture

Deeznuts. No its not true, the true economical life of a shale well is around 3 years, after which for all intensive purposes it is a stripper well.

By the 4th year they are lucky to churn out 30-50bopd from a high 

cost fracced horizontal well, and the well is not economical at all, unless you consider what they are doing. They refuse to plug and abandon as it shows investors that the projected 20 year economic lifespan was nothing more than a ponzi scheme and totally untrue.

Instead these old wells rumble along as stripper wells, and the older they are the more environmental damage they do, as less oil is often accompanied by ground water leaching, even though contrary to the critics of deep well drilling, the wells are much much deaper than any ground water source. Because of the fraccing over time water leach occurs when oil production drops to a trickle.

The oil companies though like the pretence of so many wells producing, or having so many rigs at work, even though most they cannot keep up with the decline rates of the wells, because the leases are not infinite, the sweet spots are used up first and pad drilling has the effect of exhausting reserve even quicker.

That leaves thousands of wells that should be plugged and abandoned, with the deeper horizontal wells costing several million apiece to properly decomission, but instead kept pumping unecomically to keep the losses that would otherwise occur off the balance sheets.

Sooner rather than later, you can bet your last dollar that these companies will sell off the 'stripper' wells to some newly created shell company, for that company to then go bust, leaving thousands of wells that need properly decomissioning, as open sores, creating all sorts of problems, with no one around to pay for it....where the bill will be billions of dollars.

Sapere aude's picture

The rig count figures in this article are rigged! Ironical isn't it.


Now if you look at the real rig figures you will see how for example the Eagle Ford looks to be already depleted, with just 2 more rigs, at 56 rigs which is 4 LESS than last year same time.


Now with around 12,000 wells drilled on Eagle Ford, all now legacy, they need to drill approximately 5,000 wells just to keep production level, or 100 wells per week for the whole of the year. With 56 rigs that's impossible, even with pad drilling so its safe to say the Eagle Ford is on its way out, drilled out.

So now they are off to the permian to do the same game, but the Eagle Ford never made money, and they threw $1.50 for every $1 they got back, and that included $100 dollar oil periods.


Now look at the Barnet, you remember that, the saviour of the U.S. oil that was going to produce billions of barrels but just 2 rigs at work, so that's knackered too.


All these stripper wells kept off the plugged and abandoned list because it will cost billions to properly decomissioning all these wells.


12000 to decomission on the Eagle Ford,

The Barnet had 15,000 wells, virtually all now legacy wells, so how much to decomission and properly plug and abandon these, when the companies that drilled them never even made a profit on the oil and gas they produced in the first place, but with literally billions upon billions of dollars required to plug and abandon them.


Then we have the Monterey Shale

"The oil had always been a statistical fantasy. Left out of all the hoopla was the fact that the EIA's estimate was little more than a back-of-the-envelope calculation."


A spokesman for the Institute, Tod Brilliant, told me: 

"Given the incredible difference between initial projections of 15 billion barrels and revisions to 600 million, does this not call into account all such global projections for tight oil?"

The only thing keeping companies afloat is not production which is still losing them millions, its renegotiating high interest secured debt, but increasing that debt tremendously but making it unsecured....so we all know what is going to happen there with unsecured debt!



Joseph Shelby edneckra's picture

Well, whatever your name is Tyer you are in the dark and know nothing about the oilfield and I suspect you are a desk jockey that has never set foot on a drilling rig in your life. The"Surge" in drilling rigs that you are talking about amounts to nothing. The typical rig count when things are kind of scraping by is around 800 to 1000 and when it is going good 1500 or more. You are going to see no significant job increase with 15 rigs, next time you decide to spout off about something you dont know, get off your ass and do some historical data research. Your welcome.


"However, as exuberant as this number is, job gains are nowhere to be found as the robotization of the industry (amid more 'real' costs of capital) provide no help to Americans..."


Robots??? The only robots on land rigs are the men that work on them, 12 hours at hard labor in any weather day or night. That picture in this same article with the guy in the hard hat grabbing the red thingy with all the knobs on it, is called an ST-80. This is a machine or a labor saving devise; do you consider your car a robot? Your "robot" will still need to be operated by a man and the rig will still require two floor hands, a motor hand, derrick hand and a driller for one shift out of four reagrdless of current technology. You know nothing, go back to talking about something you are qualified to talk about like a turd floating down a river or something even worse....goldman sac's.

Sapere aude's picture

Joseph. Spot on. 'the surge' in drilling rigs amounts to nothing!

All the best