Houston-based Halliburton Co. which had a 28 percent decrease in annual revenue and failed to complete its proposed mega-merger with Baker Hughes Inc., cut the largest number of local jobs and highest percentage of its staff of any company on The List. In total, the company reduced its local employee count from 8,000 to 4,500 — a 44 percent decrease in staff from the year prior.
Overall, job cuts averaged about 11 percent for the Houston-based energy companies that have reported employment data to the HBJ for the past two years. Schlumberger Ltd. was the only company on the list to show significant employee count growth due to the completion of its multibillion-dollar acquisition of Cameron International. Schlumberger added around 1,400 jobs to its local job count and is now the largest energy company by employee count in the Houston area.
More than 13,000 Houstonians have lost their energy jobs in months leading up to July 2016, according to the Greater Houston Partnership. That’s about one in every 245 people who were in the Houston labor force a year prior, according to Bureau of Labor Statistics data.
However, Houston’s energy sector is at the tail end of the layoff process, said Patrick Jankowski, vice president of research at the Greater Houston Partnership.
“You get to a point where you just can’t cut anymore and still have a company,” Jankowski said. “There is a sense out there that the worst is over. Companies are trying to hold on to their employees for when things turn around.”
As long as oil stays above $40 a barrel, Jankowski said he doesn’t expect to see additional major cuts. Rather, energy companies are worried about what to do when prices turn around.
“There is a concern out there that we are now under-investing in oil and gas exploration,” he said. “That 18 months from now we are going to find that we are back to being short in oil, which will result in a price spike, which will repeat the cycle of the last three years again.”
This cycle will come in conjunction with a labor shortage, as many former energy employees have left the energy sector, Houston area or both. As companies turn their focus toward ripe energy resources in the Permian Basin and Marcellus Shale, they will need to hire skilled employees again that were previously let go, said Kenneth Medlock, director of the Center for Energy Studies at Rice University’s Baker Institute.
“The human capital is very specialized and very technical,” Medlock said. “They are not easy to replace. When you get to a point where you have to cut those individuals, you put yourself up against a wall for the next cycle.”
But even still, that shortage will not be large enough to restore the number of jobs lost during this most recent oil slump, according to both Medlock and Jankowski. Houston’s top energy companies have now learned to function more efficiently with fewer employees. Although companies will still need to hire, it will not be to the same extent that it was in the past, nor will companies need the price of oil to jump back up to historic highs to turn a profit.
“The price that oil needs to reach to attract capital back into the sector is between $60 and $70 a barrel,” Medlock said. “As that happens, you are going to see hiring begin, but it is going to be disciplined. Companies are going to hire what they see they need right in front of them.”