Posted on 01/30/2015 12:19:56 AM PST by 2ndDivisionVet
Tulsa-based drilling rig maker and operator Helmerich & Payne Inc. expects to lay off 2,000 employees companywide, it announced Thursday during a conference call.
The cuts, which are already beginning, are spurred by a reduction in rig use due to falling crude oil prices, CEO John Lindsay said during the earning call with analysts.
Helmerich & Payne employs about 500 in Tulsa and nearly 12,000 companywide. The overall reduction is about 17 percent of the company’s total workforce.
“This is without question the worst part of the downturn,” Lindsay said.
Lindsay revealed the layoffs shortly after a company earnings report which indicated a $203 million profit for its first fiscal quarter.
“The strong quarter is overshadowed by a rapidly deteriorating energy market. With oil markets oversupplied, sluggish demand forecast, prices at six-year lows and without confidence that we’ve reached a pricing floor, great uncertainty exists for our customers,” Lindsay said.
Later in the day, the company did not give exact numbers on the jobs impact to Tulsa but indicated that the brunt of layoffs would be in the oil fields.
“As relates to the 2,000 or more mentioned positions that could be eliminated, Mr. Lindsay was referring to the company’s field positions directly related with operating the rigs that may no longer be active,” a company statement read. “These type of positions are not ones associated with our Tulsa presence.”
The company will cut in half the number of high-tech drilling rigs built each month this year. Rather than four, Helmerich anticipates building just two rigs per month.
Chief Financial Officer Juan Pablo Tardio noted that the company has been hit by early terminations from energy producers in the oil fields.
“Since our last conference call in November, we have received termination notices for a total of approximately 22 rigs under long-term contracts in the segment,” Tardio said in the conference call.
Falling oil prices have led to oil producers cutting budgets and exploration. This is hurting Helmerich and others in the oil services industry. Oilfield services provider Baker Hughes said earlier this month that it plans to cut 7,000 jobs — or about 11 percent of its workforce.
“Oil prices at six-year lows are significantly impacting spot pricing and drilling activity in the U.S. and we expect this to unfavorably impact our quarterly results during the rest of fiscal 2015,” CEO John Lindsay said in a statement.
“Nevertheless, we believe we are positioned to successfully navigate through the down-cycle as a result of our strong balance sheet, our term contract coverage, and our modern fleet of AC drive FlexRigs.”
Quarterly net income for the three months ending Dec. 31 rose to $203 million, a $34 million improvement over the previous quarter. It was also a big jump over the $173 million reported the same period last year. Revenue increased some 19 percent over 2013 to $1.06 billion.
Helmerich’s layoffs were not the first job cuts to nick Tulsa’s energy sector. Baker Hughes, which operates plants in Claremore, Broken Arrow, Sand Springs and Barnsdall, plans to lay off 7,000 workers, while Tulsa-based Laredo Petroleum earlier announced it was letting go of 20 percent of its workforce.
Apache Corp., based in Houston, is laying off a portion of employees within its Tulsa regional office. Oilfield services giant Schlumberger, which has a plant in Bartlesville, also has announced layoffs.
Since the economy has soared beyond any and every forecast, how can there be sluggish demand?
Global economy, global demand for oil, global oil prices
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