Oilfield companies cut jobs, brace for bankruptcies (updated)

STEP Energy Services

07/04/2020 17:59

(New throughout, adds comments, Kansas City Fed report)
    By Liz Hampton
    April 7 (Reuters) - More oilfield service companies
dismissed workers this week and law firms braced for an
onslaught of coming bankruptcies in an industry slammed by
slumping fuel demand and crashing prices during the coronavirus
pandemic.
    Firms that provide oilfield services and equipment had
barely recovered from the 2014-2016 downturn before crude oil
prices last month plunged to near two-decade lows. Many were
already operating on thin margins, and now face customers
pushing for deep price cuts.
    Houston, Texas-based fracking services company NCS
Multistage Holdings  NCSM.O  is cutting about 80 employees, or
20% of its workforce, while Canadian firm STEP Energy Services
 STEP.TO  also is shedding more than 150 workers in Texas and
Oklahoma due to the "drastic downturn in oil," according to
workforce filings. 
    Eight oilfield providers, with a total of $10.9 billion in
debt, have filed for bankruptcy this year, including three since
prices fell to $20 a barrel in early March, according a report
released on Tuesday by law firm Haynes and Boone. Lawyers
anticipate more trouble ahead.
    "OFS [oilfield service] companies will feel the brunt of
this impact," the firm's lawyers wrote, adding "many smaller or
highly leveraged companies may not be able to hold on."  
    On Tuesday, U.S. crude futures were trading around $25.78 a
barrel, up from the low of around $20 but still below the cost
of production. 
    Oil firms operating outside the Permian basin may be
particularly hard hit by those prices, according to a survey
released on Tuesday by the Federal Reserve Bank of Kansas City,
which includes Oklahoma, Colorado, Wyoming, Kansas and parts of
New Mexico. 
    On average, producers in those states need oil prices at $47
a barrel to make money. Most firms surveyed in the report do not
expect energy prices to return to profitable levels this year.  
    "Long term $30 per barrel (oil price) will lead to massive
consolidations and insolvency," one survey respondent said. 
    Large oilfield firms have cut expenses to adapt to lower
demand and prices. French drilling pipe manufacturer Vallourec
 VLLP.PA  this week said it was cutting 900 jobs, or one third
of its North American workforce, after activity collapsed in the
oil and gas industry. 
    The decision was "necessary in a quickly deteriorating
environment," Chairman Edouard Guinotte said in a statement on
Monday. 
    Halliburton  HAL.N , the largest hydraulic fracturing
operator in the United States, on Monday said it was
"significantly reducing" its workforce, and its executives
agreed to take a pay cut.  urn:newsml:reuters.com:*:nL1N2BU0OF

 (Reporting by Liz Hampton
Editing by Paul Simao and David Gregorio)
 ((Liz.Hampton@thomsonreuters.com; +1 713 210 8522; Reuters
Messaging: Reuters Messaging: liz.hampton.reuters@reuters.net))