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Fear of Layoffs, Unease Hit California Oil Patch

With the public notice last year of at least the possibility of one oilfield service firm contemplating laying off workers, sharply lower global oil prices at the start of the new year are sending some economic aftershocks of uncertainty through California's oil and natural gas sector, not unlike other parts of the nation.

So far, it isn’t clear if the notification by Calgary, Alberta-based Ensign Energy Services Inc. about the possibility of laying off up to 700 workers in Kern County is an isolated case or an indication of what is ahead on a broader basis.

A source in Alberta familiar with the company's action cautioned that there are currently no plans to lay off workers, but Ensign felt legally obligated to alert state employment authorities of the possibility, given the chance of drilling rigs being shut down. Ultimately, whether there are layoffs or not will depend on what Ensign's customers decide to do with their drilling plans this year, the source said.

A spokesperson with the Western States Petroleum Association (WSPA), which includes the state’s largest oil and gas operators, told NGI on Wednesday that he was unaware of any other layoff announcements, adding that WSPA members are generally the “big guys and can usually weather cyclical changes a little longer than smaller producers.”

He said he had only heard anecdotally that there might be some cutbacks in Kern County and elsewhere, but without any specifics. Similarly, officials at the state Division of Oil, Gas and Geothermal Resources, which oversees oil and gas activity in California, told NGI they were unaware of any specific layoff plans due to the oil price situation.

A major exploration and production company in the state, California Resources Corp. (CRC), which was recently spun off from Occidental Petroleum Corp., has said it is taking a close look at its operating plans and budgets for the new year in light of the steep oil price decline.

"We do not anticipate employee layoffs based on the current commodity prices [$50/bbl], although our activity level is decreasing," said Margita Thompson, vice president for communications at CRC. "Since we operate the vast majority of our fields and own much of our acreage in fee, we have the ability to change our activity levels rapidly to reflect market conditions."

Without giving any specifics, which the company maintains as proprietary, Thompson said CRC is "adjusting" its planning to reflect the current pricing environment as it finalizes its capital plans for this year. "One of our key principles is to live within our cash flow," she said.

According to the California Employment Development Department (EDD), Kern County had 11,800 people employed in the oil and gas industry in October, a sharp decline from September, when oil prices were dropping but still were above current levels.

In the wake of the last big oil price drop, petroleum industry jobs in the county dropped from 10,300 in November 2008 to 8,400 a year later, according to a recent Bakersfield Californian report.

Ensign's notice, which was posted on the EDD website, indicated that the layoffs were supposed to be effective in mid-December last year.

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