Now that oil prices are stable and above $50 per barrel, the energy industry’s depleted workforce is being called back into the field, particularly in the Permian – but there are far fewer candidates with an ear to the ground.
As many as 350,000 oilfield workers lost their jobs during the downturn, which stretched beyond two years in a much lower for much longer down cycle. But the U.S. rig count is on the upswing, led by a frenzy in the Permian Basin, and companies need bodies at the wells.
Those companies that recognize its time to staff up will likely find the workforce needed to charm the hydrocarbons from the earth, said Jeff Bush, founder of CSI Recruiting.
“A lot of good people are still on the street and haven’t found work yet. Some in other jobs are interested in making a career change but have been unable to,” Bush said. “There is a lot of pent-up demand for new opportunity.”
But for those companies slower to respond, there will likely be problems finding talent.
“Those positions that soak up low hanging fruit in that first wave … those companies have a lot of good opportunity to pick and choose and get the right person for their role,” Bush said. “But as the year progresses and if prices stay or improve, I see the labor market really tighten in latter part of 2017.”
By virtue of senior talent opting for retirement, professionals who left the industry and few new grads among the current workforce, the industry’s overall pool of talent declined, he said.
Oilfield service (OFS) experts say the squeeze has already arrived in the Permian.
“OFS companies have pressed fresh (green) blood into service amidst a vigorous ramp up in activity, and failure/HSE rates have already felt the negative impact,” said James West, a senior managing director at Evercore ISI, in a recent note to investors. “Not only is labor a bottleneck, it is shaping up to be the primary bottleneck in the early stages of the [North American] recovery.”
West said that in the Permian, hiring lead times have increased 50 percent from 30 days to 45 during the last two months; and it may increase to 60 days by the second half of the year.
Still, there is light at the end of the tunnel, he explained.
“Despite the labor-related hurdles that NAM has experienced in the early-going of the upcycle, we believe swift service pricing increases will lead to even more robust hiring and training efforts (where the large-cap diversifieds have a distinct competitive advantage),” he said. “E&P’s will throw enough money at the NAM labor problem to bring the sector back to equilibrium, sacrificing capital efficiency to hit production targets.