Posted on 12/08/2014 4:45:51 AM PST by thackney
When Jack Ekstrom joined Whiting Petroleum Corporation in 2008, the company had 450 employees. Six years later, the company has 1,100 employees, said Ekstrom, vice president of corporate and government relations at Whiting.
“At any given time, we have about 250 approved positions that we need to fill during a 12-month period,” Ekstrom said, “even though we are not recruiting for all of them at the same time.”
Whiting Petroleum’s surge in hiring reflects a larger hiring boom within the oil and gas industry that is playing out across the nation. U.S. Bureau of Labor Statistics indicate that 119,800 people were directly employed in oil and gas extraction across the U.S. in 2004. Ten years later, that number has nearly doubled, to 213,500.
Advances in production technology — including horizontal drilling and hydraulic fracturing — are the primary factor behind the hiring growth in the oil and gas industry. “The new technology has driven activity to levels that were previously not believed possible,” said Ekstrom.
The problem now is that companies can’t find enough qualified people to fill the positions being created. “If you look at all the companies operating in the DJ Basin — PDC, Noble, Anadarko, Whiting, Carrizo, Bill Barrett – every one of us is recruiting for jobs in Weld County,” Ekstrom said. “We have all talked about how demand [for qualified talent] has outstripped supply.”
The lost generation
The boom-and-bust history of the oil and gas industry is partly to blame for the dearth of experienced talent available today, according to Elizabeth Dahill, principal at The Dahill Group, a professional oil and gas recruiting firm based in Denver.
“Back in the late 1980s and early 1990s the industry was in a slump and there were significant layoffs,” Dahill explained. “Most of the big majors — like Apache and Marathon — pulled out of operations. They retrenched, laid off people here in the Rocky Mountain region, and moved their operations to Houston. It meant that we have this lost generation of individuals that were unable to find work in the industry, so they had to retool themselves into other industries.”
Colorado’s best-known industry dropout may be Gov. John Hickenlooper, who opened the state’s first brew pub after he lost his job as an oil and gas geologist in the mid-1980s.
“Twenty years later, now that the industry is back, we are experiencing a lack of leadership because we don’t have the individuals that were just being groomed for oil and gas leadership roles 10 or 15 years ago,” Dahill said, “This ‘lost generation’ has really had a significant impact.”
Indeed, surveys conducted by Deloitte Research indicate professionals in exploration and production (E & P) companies are, on average, 50 years old. Furthermore, 40 percent to 60 percent of the industry’s aging professional workforce, including geoscientists and engineers, are expected to retire in the next five to 10 years.
A wave of retirements
Many companies with connections to the DJ Basin already have begun to experience the coming wave of senior-level retirements. In March of this year, Bonanza Creek announced the retirements of Gary A. Grove, executive vice president of engineering and planning, and Patrick A. Graham, executive vice president of corporate development. In April, Noble Energy announced the retirement of CEO Charles Davidson, who had served in that position since 2000. In August, Carrizo Oil & Gas Inc., announced the retirement of Paul F. Boling, vice president, chief financial officer, secretary and treasurer. And in October, Plains All American Pipeline announced the retirement of Chuck Kingswell-Smith, vice president and treasurer.
“Many companies lack the bench strength they need at the executive level,” said Dahill. “In fact, only 15 percent of the companies we surveyed actually believe they have an internal candidate available to take over for a retiring CEO.”
Engineers in short supply
The downturn in the fortunes of the oil and gas industry affected not only people already employed in the field, but also students deciding on career directions. Bill Cassidy, executive vice president and CFO at Bonanza Creek Energy, said, “At the end of the 1990s, there was a lot of oil and gas company consolidation. So a lot of kids heading to universities walked away from energy and studied tech and business and finance instead.”
Data from the Colorado Department of Higher Education shows that in 2004, the Colorado School of Mines awarded only 25 baccalaureate degrees in petroleum engineering; in 2013, the number of baccalaureate degrees awarded in petroleum engineering increased to 127.
“There are always going to be companies looking for engineers,” said Jacques Pernitz, president of Precision Placement Services Inc., which specializes in oil and gas recruiting. “Engineers have always been difficult to find. If you are a strong engineer, you are going to find a job. Companies will create positions for those types of good people.”
The catch is that it takes time for an engineer to develop marketable expertise. A 2014 Labor Market Analysis of the Oil and Gas Industry, conducted by Mercer, estimated that it takes three years of experience for a petroleum engineer to master the fundamentals of the job; four more years to become proficient; and 11 more years to become an expert.
“Companies that come to us want experienced talent,” Pernitz said, “They don’t want to pay for inexperienced talent. We can’t bring them entry-level people. That is why when we get contacts from entry-level people, we give them advice, and we encourage them to contact the companies themselves. It is very unlikely, from a recruiting company standpoint, that we are going to be able to place them.
“In almost all areas of oil and gas now, the five- to 10-year person is an extremely valuable person,” Pernitz said. “That is probably the most marketable candidate out there, because they are not that 30-year person, coming up on retirement, but they have enough experience at that five- to 10-year level. They are up and coming, and they are highly marketable.”
Poaching abounds
The finite labor pool in the industry sometimes leads companies to poach the talent they need from other companies. “People poach back and forth as they see great talent out there that can bring their drilling forward and allow them to grow their company,” Cassidy said. “It’s a very competitive environment.”
“It’s a seller’s market here for employees,” said Ekstrom, “if you are available and you have the skills, you can pretty much name your own price.”
James Masters, manager of investor relations for Bonanza Creek Energy, said that one advantage Bonanza has is its Colorado location. “At higher levels, people have options and can go wherever the pay is best, or wherever they want to be,” he said. “Living in Colorado is a bit of a selling point. We have a lot of people who want to be here. They want to leave Houston and come to Denver, so that is a kind of intangible benefit that we have compared to some of our peers in other areas of the country.”
Pernitz said that poaching has always been a strategy used within the oil and gas industry, but “in the past, when they used an outside recruiter, nobody would complain, because the recruiter did the poaching.
“Now companies are hiring their own recruiters and doing it [poaching] directly,” Pernitz said. “They are going to LinkedIn and contacting the candidates themselves, which I think is going to cause major problems in the industry. There are going to be payback ramifications.”
Transferable skills
Some companies are approaching the labor shortage by casting a wider net and looking for talent outside the oil and gas industry. The mining industry, for example, has many concerns in common with the oil and gas industry.
“Some of the skills and issues in mining and oil and gas are similar,” Dahill said. “For example, managing the capital to mine, the capital to drill, the shareholder issues, the government regulation issues, the special interest issues. You have all of those things in both industries, so I have seen people that migrate back and forth a little bit from the mining industry to the oil and gas industry.”
“Some skills are transferable,” said Dahill. “Chief financial officer skills can sometimes be learned outside the industry, and chief technology officer skills as well. The CFO and the CTO are not as critically driven by the nuances of the industry as the CEO and engineer are.”
“In the engineering space, the skills are not transferable,” Dahill said. “You can’t go and pick somebody up who is a chemical engineer at a place like DuPont and train them to become a reservoir engineer or a drilling engineer or a completions engineer because of the complexity involved.”
Pernitz agrees that “there is a big difference between being an engineer within the oil and gas industry and being an engineer outside of the industry.”
“In the history of my company, none of my clients have ever asked me to find somebody who did not have specific industry experience in oil and gas,” Pernitz said.
Grow your own
The limited effectiveness of poaching in a finite market and the limitations of bringing in talent from outside industries has led many companies right back to the starting point. That is, hiring talent fresh out of school and growing their own.
“Whiting is recruiting heavily at the Colorado School of Mines, at Colorado State University, Montana State, the University of North Dakota, Texas A&M, and places like that, for the exploration geologists and the geophysicists and the petroleum engineers that have advanced degrees,” said Ekstrom. “We recruit very heavily for those because those are the ones that define the future success of the company.”
“One of the most important things the industry is learning right now is that they need to take a long-term view in building the professional talent pool,” agrees Dahill. “Even though the industry may surge and dip, based on oil prices, it will cycle back up, and if we can continue to stay on track in identifying skilled and experienced individuals who can be trained and nurtured into these new roles, it will make a significant difference.”
This article is hard to believe. We have 92 million people out of work in this country and companies can’t find talent?
They don’t just need a pair of hands. They need specific skill sets that are in short supply, compared to the current demand. My company has the same problem and we do pay above market rates.
....with experience...in a particular field that has little crossover expertise...
More young people would go into this field (dedicating the required time, money, and effort) if they didn’t fear our government allowing foreigners in to steal their jobs. Bill Gates publicly bemoans the lack of young Americans going into the tech sector, out of the other side of his mouth he is threatening our government that he will move jobs to Asia or Vancouver to keep salaries down...
My take on the piece is that there is a pool of retirees that must put the collar back on and pull the wagon a while longer for big $$$ : )
America's been painted into a corner with our job market. Over the years, unskilled labor positions have been outsourced while skilled labor positions have required more specific skillsets. I can point to my own industry, IT, as a perfect example:
When I started in IT in the mid-90s, anyone who could code a simple HTML web page was considered an "IT guy." Over the years, the understanding of computer basics has become commonplace to the point that Indians with a basic grasp of the English language could talk your 80 year old grandmother through clearing her Internet cache or rebooting her computer.
Now, even the Indians are starting to show their lack of advanced skills while lower-level IT positions such as help desk and desktop support are being "insourced" with many companies contracting their support for those roles to American workers. Sadly, the skillsets required for domestic help are higher than what was expected of the Indians, so you have many help desk positions going unfilled due to lack of basic IT functional understanding (i.e. the difference between RAM and disk space).
I'm seeing more and more often that the "low end" IT people are, to be frank, really dumb. They know how to shuffle around work orders to their engineers or do basic, scripted IT support, but overall, they have no drive to be better, they are just happy to have a job. Meanwhile, the rest of us are becoming more specialized in our disciplines, leaving gaps in certain specialties.
I have to imagine this all translates to other industries as well.
Get some of these highly skilled illegals to fill the positions.
The industry has been taping that pool for a few years, at least from what I see on the engineering/design side of energy related facilities.
Most can’t pass a drug test. I have 70% failure on drug tests - even when you tell them there will be a test. Had one last week show up and blow a 0.14 at he clinic.
We suffer from the same disease here. Upper Management has decided to make Help Desk staff P/T, they are only allowed hours below the Obamacare minimum hours per week.
It takes 12 to 18 months to get them up to speed to perform to a level we can rely on to function independently. Those with any ability and drive are usually gone in less than 2 years for a Full Time position some where else.
The Poor ones never leave. Out of 8 Hired 2 years ago, 4 left for Greener pastures, two were fired and the other two can hardly log a call properly.
Sounds familiar. They keep hiring more people not realizing that the problem is competency and not numbers. I’m predicting that advanced systems comprehension will become a rare skill while basic computer skills will become unnecessary as more people opt for mini and micro platforms that are considered “throw away.”
I now have two relatives working in the energy industry. Both took the jobs within the last 6 months. Prior to taking the jobs one was an underemployed college grad, the other was self employed but got out of it as being too expensive and hard to be a one man small business.
So Thackney, I have a 16 year smart young man(my son). He is good in math and science. He is a good organized thinker. What would you recommend he train himself to do?
Chemical engineer, Petroleum engineer?
I talk to several long haul trucking companies. There is a truck driver shortage in the US. The biggest issue for them is hiring someone who can pass a drug test. As you can guess, the last thing you want to do from a liability standpoint is put a pot head behind the wheel of a $150K semi tractor pulling a $75K trailer that weighs 110,000 pounds.
My opinion, and worth everything you paid for it:
Petroleum Engineer will pay the best while demand is high, and fall the quickest of most engineering when the eventual swing comes.
Chemical engineers tend to stay in steady demand, processes for for different products, from different feedstocks can help balances swings, baring global economy drops. At major firms, they tend to be more inline for promotion to upper management, but no hard fast rule there.
I’m electrical, facility based. I’m specialized in power despite my college adviser attempts to guide me away from that “old technology stuff”. I’ve worked upstream, midstream and downstream; which has helped me find work through the business cycles. If oil/gas is expensive, upstream booms. When those feedstocks are cheap, downstream can afford their expansions. When new areas become producing, midstream booms. Mechanical, structural, controls tend to all have the same flexibility I see for the market I serve. And the greater Houston market is nearly equal to the rest of the US for this industry.
Way more industries demand engineers than the oil/gas/petrochemical market. But I rarely find they consistently pay as well. Consulting type engineering like I do tends to pay far better than working direct for the owners. But it also has the most ups and downs. The consulting worlds in the bigger firms also open up opportunities to reach a different industry, like a Nuclear Power Plant design. It is harder to get into.
All that discussion based upon an assumption he wants to be an engineer, and is willing to put forth the effort in college while he watches many of his buddies get to spend more time at parties, etc.
Absolute best advice I can give is to one starting college for engineering, get summer jobs/co-op in a technical area. Grunt work at an engineering office, or a construction job is far more valuable to the college grad recruiter than being the manager at Taco Bell.
When I graduated from SUNY Forestry school in 1985, all the paper science engineers had multiple job offerings prior to graduating. It was basically chemical engineering oriented to making paper. However, most of those paper mills were in small towns in the middle of the woods. Ok place to work if you liked just to hunt and fish, but not a lot of night life. Also, a tough place to move to for a single young man.
Not too many potential future Mrs. Woodbutchers. if you know what I mean.
I graduated with a degree in wood products engineering. I was offered a job in Graying, MI at a particleboard plant. It turned it down because there was nothing to do in Grayling other than hunt fish and snowmobile. I went into selling wood products instead of manufacturing them. At least I did not go into the furniture manufacturing industry. I would have had to move to China. Some of my classmates did. They had to switch industries when all the plants moved offshore.
He is a good student and not girl crazy. He is not that interested in partying. He is not a jock either. He is kind of a nerd. He is self driven to stay on the high honor roll(straight A’s)at school.
He is mad at his current pre Calculus teacher because she does not teach in class all of the material on the tests. He says he learns more from the homework. He also seems to like chemistry and anything engineering. He is taking an engineering course in high school now. His first project was to build a bridge. He choose a truss design. His current project is to take a printer and use the parts from it to make a car that will be judged based on speed and towing ability. He was talking to him about gear ratios. He seemed to comprehend well.
So, to summarize, I believe he would make an excellent engineer. The only thing that scares me is when he brings home a brochure from Northeastern University and the cost for tuition, room and board is $56K/year. Holy crap, I need to sell more lumber.
My oldest daughter had this problem. Her high-school calc teacher didn't teach worth a darn. She learned calculus at the dinner table late into the evening with me. A lot of struggle.
This year, in calculus at Texas Tech, her average is above 100% due to the possible extra credit and curving of major exams.
I believe he would make an excellent engineer.
Sounds like the right aptitude and attitude.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.