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Service sector gets hammered Canadian drillers forced to idle rigs, eliminate jobs, cut paychecks of staff, executives, pullback from some foreign operations Gary Park For Petroleum News
The costs of the rapid erosion of Canada’s upstream sector have landed squarely on supply and service companies, who are under extreme pressure to rebid on contracts or slash a minimum 20 percent off their orders.
Many of those companies have made it clear they will not play ball as they eliminate jobs and idle equipment, while some are hoping to ride out the storm by reducing the paychecks of executives, employees and directors, while pulling back from some frontier operations, or underperforming plays.
The result has been a sharp decrease in Canadian activity, with the traditional spring wind-up of the peak drilling season starting earlier and expected to drag on longer.
Calfrac leaves Colombia Calfrac Well Services has taken drastic action beyond its domestic borders, leaving the South American country of Colombia entirely, rationalizing its Mexican unit, parking half of its fracturing horsepower in the United States and closing a coiled tubing operation in Pennsylvania.
“The pressure is there,” Calfrac Chief Executive Officer Fernando Aguilar told analysts. “We’ve seen people parking fleets already. We’ve seen customers asking for more ... so the market’s very competitive.”
That was a dramatic mood swing from last November, when he said horizontal well completions were expected to be strong for the balance of 2014 and into 2015, led by exploration in British Columbia to build natural gas supplies for proposed LNG projects and improving performance due to new well completion technology.
Trican cutting salaries Trican Well Service said it is cutting salaries (by 10 percent for its full-time staff and 15 percent-18 percent for senior executives), fees and costs, while reducing its North American workforce by 600 positions to save an overall C$28 million.
The company said it has already dropped a fracturing crew in each of its Eagle Ford, Bakken and Permian regions, while closing its operating base in Longview, Texas, where one fracturing crew and two cement crews had previously operated.
Calfrac and Trican both said their customers are stepping up the “intensity” of their hydraulic fracturing jobs, boosting the number of fracks in each horizontal well, and also increasing demand for more lucrative 24-hour service.
Calfrac said the number of fracking intervals it performs per well in Canada has increased 73 percent over the past year and the amount of sand injected per well has doubled.
Trinidad laying off staff Trinidad Drilling is lying off staff and making an average pay cut of 7 percent for its remaining employees, while halving its 2015 budget to C$175 million.
“We feel that a prudent approach to the coming year is important and have chosen to lower our capital expenditure level from 2014,” said Chief Executive Officer Lyle Whitmarsh.
“We have postponed some rig upgrades until demand increases and have worked with our customers to meet our commitments while also conserving cash generated from our operations.” A Trinidad spokeswoman said she did not know how many of the company’s 3,000 employees will be laid off because an announced 20 percent reduction does not affect those who work on rigs.
The company - which operates in Canada, the United States, Mexico and Saudi Arabia - said it will “postpone upgrades previously scheduled for existing rigs and will review this decision as market conditions change throughout the year.”
It said capital items purchased for new builds and upgrades that are no longer required will be placed in capital inventory for use on its existing fleet.
At the end of February, 289 rigs were operating in Western Canada, representing 37 percent of the industry’s total fleet, the Canadian Association of Oilwell Drilling Contractors reported. That is down from 317 rigs operating at the same time last year.
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