Oil and Gas Workforce Bears the Brunt of Falling Crude Prices

Sept. 14, 2015 - PRLog -- Since January 2015, almost half of oilfield service company owners have seen work volumes decrease by more than 25%, and nearly 60% are bracing for further reductions according to a survey of owners and C-level executives of privately-held US companies conducted in August by Citadel Advisory Group, a boutique investment banking firm serving oil and gas and related industries. Over 75% of respondents have reduced rates by over 10%, and nearly 60% anticipate further rate reductions as the industry attempts to counter falling oil prices.

Chris Frevert, Managing Director of Citadel, commented “The early summer WTI head-fake above $60 provided some temporary optimism to many people in the business. We wanted to see if the current down-leg into the 40’s was putting additional pressure on service providers, and if so, how much and what was being done to weather the storm.”

When the first survey was conducted in February 2015, there was still a group of service companies (nearly 8%) that had not felt the effects of the downturn. As of August, all respondents had seen pricing decreases and nearly 60% expected more to come. A similar trend was seen in work volume.

One question asked was “In your opinion, where do you anticipate the price of WTI to be on December 31, 2015?” Over 80% of respondents believe the price will be less than $55 per barrel, a somber contrast to responses in Q1 when the majority anticipated prices over $56 per barrel. Oil was trading at $45 at the close of the survey period.

“Any optimism that oil will make any meaningful recovery by year-end seems to be fading quickly for those in the trenches,” Frevert remarked.

As with the first survey, approximately 70% of the respondents have been in business for more than 10 years. “Most of these folks have been here before, and have the knowledge and determination to ride this out,” said Frevert.

In addition to questions about company demographics such as basin focus, revenue, and workforce size, the survey also assessed company-driven cost reduction strategies and the end result of price reduction negotiations.

For more details on the survey and its results, contact Claudia Davis at Citadel Advisory Group.

Citadel Advisory Group is a mid-market Investment Banking and merger and acquisition advisory firm focusing on the energy service sector and those that manufacture into the oil and gas industry. Citadel offers M&A advisory services, consulting, recapitalizations, exit and succession planning, valuations, divestment advisory and strategic financial advisory services. For more information please visit www.CitadelAdvisory.com or call (970) 267-0802.