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Booming Economy Leads to Shortage of Land Rig Workers

Booming Economy Leads to Shortage of Land Rig Workers

"Wanted: entry-level workers, roustabouts, floorhands, mechanics and electricians. Training, benefits provided." It's a virtual posting in drilling companies' offices across North America. Unemployment is so low, and jobs so plentiful across nearly every job sector that finding potential employees who are willing to work for low-end wages in the oil and gas industry has reached a critical stage.

It's a double-edged sword, say analysts. Because the rig count is higher --- and is expected to grow --- more workers are needed. With higher oil and gas prices, E&P is growing, and thus will lead to more rigs, and more workers. Salomon Smith Barney's E&P: Natural Gas Outlook (May 19) reports a "dire outlook for North American gas deliverability." Storage is down, demand is up. The workforce for land rigs, however, remains low (see related story this issue).

Austin-based Stanton Mineral Development has been waiting on a well to get back on line for weeks, but the contractor it uses has had trouble getting workers to get it going again. So the well sits out of production.

"It's a problem for us and for a lot of operations large and small," said Stanton operations manager Christopher Long. "I can see where the contractor doesn't want to hire unskilled workers. This is dangerous work, and if someone gets hurt, then you have a litigious situation." Long said the worker shortage "has to be addressed," but it's difficult to convince someone coming out of high school to look at the oil and gas industry as a viable option.

"When the economy is so strong, and McDonalds is paying $9 or $10 an hour, and you can earn the same amount going to work on a rig, what would you rather do? Work inside in air conditioning or outside in the hot sun for the same money?"

The Texas Independent Producers & Royalty Owners Association (TIPRO), which numbers 1,800 large and small companies across the state, hears about the problems in recruiting certain types of workers every day. Martin Fleming, TIPRO's public affairs director said that the "truly unskilled" are easy to find and finding them is "not much of a problem." He said that most of the feedback he gets from members, which include giants like Apache and EOG to the four-person mom-and-pop operations, is about the dwindling workforce for certain types of professionals and skilled workers.

"We really have two areas of employment problems in Texas for oil and gas companies," Fleming said. "The number one problem is that there aren't enough geologists and geophysicists. They are hard to come by. The second area is finding skilled workers in drilling, the roughnecks who have some experience. They've gone on to find other jobs since the market was down, and I don't think they're coming back."

The skilled worker, who typically has about 10 years of experience, found another job when the market took a dive. Those that did stay are also getting older, Fleming said, and now, companies have to find ways to recruit younger workers.

"It's tough getting younger workers," he said. "They are turning to the high tech companies, which stole a lot of workers out of oil and gas a few years ago."

Though it has not implemented any formal policies, TIPRO has considered helping oil and gas companies with their recruiting. However, Fleming points out that the very nature of their business makes many of the companies handle employment on their own.

"They are independent," he said. "We might get more involved in issues like worker training and education, but it's difficult to get an owner or staff to come to Austin to learn about how to recruit over coffee. They've got work to do."

The problem is not short term either. Ronald Barone, a PaineWebber analyst, said that the very nature of the business makes some prospective employees probably consider other types of jobs because they could face almost certain unemployment at the next downturn in the industry.

"Why should anyone go back to the energy patch when they could be out of work in a few months?," questioned Barone. He said the strong U.S. economy has sent prospective employees toward more certain areas of growth and stability, such as the computer industry, and moving prospective workers back to the energy patch won't be easy. Barone said he hears oil and gas company executives talk about the worker shortage, but they seem to have no answer for what to do. "It is an issue," said Barone.

Even tempting workers who have to stay employed, such as recruiting prison parolees, has not been the answer for land-based E&P companies. Recently, some Oklahoma drilling operators were quoted as saying they actively recruit prison parolees, even going so far as to wait outside prison gates to talk to those being released. However, many in the industry, and even officials at Texas Department of Criminal Justice (TDCJ) think that recruitment idea is far-fetched and short term.

In fact, the TDCJ implemented a worker training program specifically designed for the oil and gas industry three years ago. Prospective workers were trained at the Abilene, TX roughneck school for oil and gas jobs. The program, still available, has not done well despite extensive training and a wealth of job opportunities.

"It's unfortunate, but most of the training and the jobs are in rural communities and the ex-prisoners don't get to reunite with their families and they are usually far away," said Dr. Virginia Ross a program specialist in cognitive intervention with TDCJ. "The jobs are good, but it hasn't always worked out too well."

TIPRO's Fleming said the idea is a good one, and would be worth continuing, but he said that workers come into the business based on the very nature of it - such as the dangerous aspect of it, and the idea of working outside. Those who stay in the business stay because they love it, said Stanton Mineral's Long.

"The nature of what we do is that you have to love it," Long said. "It's not as sexy as say, a high tech job right now. And we've got a real need for domestic workers. Twenty years ago, this was the industry. That's a fantasy now, and that's why we're having trouble convincing people to come to work."

When oil prices dropped in 1997 and 1998, Texas lost nearly 15,000 jobs and Louisiana lost 3,400. Nearly 3,000 workers in Oklahoma also lost their oil field jobs. All told, the Interstate Oil and Gas Compact Commission estimates that nearly 29,300 oil field workers were laid off in the last bust. Now, while the rest of the U.S. economy is pushing full steam ahead, the oil and gas industry continues to recover, and while rig counts are growing, the employee count is not.

According to Baker Hughes Inc.'s latest count, U.S. working rigs as of May 19 numbered 849, up 19 from the previous week, and up more than 300 from the same time a year ago --- 518 in 1999. The Canadian rig count stands at 261, up 44 from the previous week and 157 rigs higher than at the same time last year. The biggest increases have occurred in Texas, up to 308 from 177, and New Mexico, up to 80 from 34.

Gary Flaherty, a Baker Hughes investor relations analyst, said that labor market is tight everywhere, and he doesn't see much of a difference between the oil and gas industry and other U.S. industries.

"Obviously, a booming economy is going to be a factor for anyone trying to recruit," he said. "The economy is very strong."

Along with trying to find workers to fill the positions, oil and gas companies also are faced with trying to become healthy again, said Fleming. "The industry is not as healthy as it looks," he said. "Most of our members were hanging on by their fingernails two years ago, and now they're just trying to pay down the debt. But they can't pay down the debt despite the high earnings if they can't recruit the workers to get the drilling done to keep making the money. It just doesn't work."

Said Stanton's Long: "As high as the markets are now, I see rigs sitting idle because the contractors can't find that skilled labor. We're going to have to find a solution, but we've always had this problem, and because the market is up and everyone is hot to get the rigs going, it's just worse."

Worker shortages are an issue for the land-based E&P companies, but it's a different story offshore, where drilling contractors seem to have an easier time adding to and improving their workforces. Jobs are plentiful, and there are plenty of workers available.

"We're still getting lots of applications and people to work," said Guy Cantwell, manager of corporate communications for Transocean Sedco Forex Inc. based in Houston. "On land rigs, you put the rig together, you have a lot more of a different atmosphere. Offshore, we usually pay an average of 25% higher, and we paid housing, laundry and catering services. It's 12-days on and 12-days off, and we'll fly the workers home."

Still, Cantwell is aware of the low reserves, and the inherent problems involved with increasing production.

"A mild winter at this point would be a positive," he said.

Carolyn Davis, Houston

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