Hidden Cost Of Low Oil: Energy Sector Layoffs (SLB, HAL, BHI, XOM, CVX)

If you have somehow managed to be out since last summer when the oil boom was still in full-speed, there is one issue you would not have guessed was coming this quick: layoffs in the oil patch.  We have been digging around in Houston and Dallas to get the dirt on which oil companies would begin layoffs first.  We started hearing about all sorts of cost cuts inside companies starting at the end of Q3 and things got much worse toward the end of the year.  No one inside these companies wanted to address this and merely noted that layoffs were the last thing they’d want to do until their own internal cost-cutting measures were exhausted.  It turns out that Schlumberger Ltd. (NYSE: SLB) is the first of the biggies to announce job cuts.

The Houston Chronicle at Chron.com shows that the oil services giant isshedding 5% or 1,000 jobs of its North American workforce.  You can guess why: reduced level of activity within the oil fieldservices sector.  But there is an ominous step here that goes a bit further if you read into this at all.  Additionallayoffs could come if the market fails to improve.  That doesn’t evenrule out cuts if there is just stabilization. 

Our most recent data put something to the tune of 80,000 workers atSchlumberger on a global basis.  This cu is just in North America.  What you can bank on is thatif a company like Schlumberger is doing this, then every sizablecompany that it competes with will be able to followsuit.  So which other companies will follow Schlumberger’s lead?  Here are some of the largest energy sector players broken down by an estimated workforce headcount:

• Halliburton Company (NYSE: HAL) is harder to call because of its recentmove and recent actions, but our most recent data put it with havingabout 55,000 workers.
• Baker Hughes Inc. (BHI) lists some 38,000+ employees.
• Exxon Mobil Corp.(NYSE: XOM) has more than 100,000 workers.
• Chevron Corp. (NYSE: CVX)has more than 60,000 workers.

Frankly, we do not know who is next in line with the layoffs nor how many workers will lose their jobs.  Butonething is for sure: all of them are likely to follow suit.

Texas housing and the Texas economy have held up compared to the rest of the country.  Unless these oil workers can become nurses overnight, the local pinch has will likely start hurting quite a bit more.

Jon C. Ogg
January 8, 2009