Tuesday, February 10, 2015

Halliburton to Trim Its Work Force by 7%
By CLIFFORD KRAUSS
New York Times
FEB. 10, 2015

HOUSTON — Halliburton announced on Tuesday plans to lay off about 7 percent of its work force, or 5,200 to 6,400 workers, in response to plummeting oil prices.

Halliburton and other service companies that drill and complete wells onshore and offshore are typically the first and worst hit when producers decommission rigs and cut investments in exploration and production.

In recent weeks one oil company after another has announced 15 to 30 percent reductions in their 2015 budgets because of the 50 percent drop in crude prices since June. As many as 90 rigs a week are being dropped across American shale fields over the last couple of months in the most rapid deceleration of drilling in decades. Service fees have dropped by an average of 15 percent in recent months and are expected to go down further.

“We value every employee we have, but unfortunately we are faced with the difficult reality that reductions are necessary to work through this challenging market environment,” Halliburton said in a statement.

Halliburton had announced last month plans to cut 1,000 jobs, which are included in the new announcement. The company said the job cuts were not related to Halliburton’s recent acquisition of the Baker Hughes service company.

Industry executives are bracing for a prolonged period of low prices after several years of prices around $100 a barrel. The American West Texas Intermediate oil benchmark price fell by over 5 percent on Tuesday to just over $50.

Oil prices had been recovering since late January with traders anticipating that American oil production would quickly decline. But government and industry data indicate that domestic production is still growing and adding to a global glut, and it will continue to do so until the second half of the year at the earliest.

At the same time, the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, continues to refuse to cut production as it so often has in the past when prices dropped. Instead, Saudi Arabia, Iraq and other OPEC producers have been slashing their prices on Asian markets to protect their market share.

Igor I. Sechin, the president of Russia’s state oil company and one of the country’s most senior energy officials, harshly criticized OPEC for having “lost its teeth” in a speech on Tuesday at International Petroleum Week in London.

Mr. Sechin said he saw no market reasons for the price collapse that was damaging his country’s economy, because war and geopolitical conflict are still rife in oil-producing regions around the world, thus prices should remain higher.

A series of research reports in recent days have predicted a prolonged bear market for the commodity. The International Energy Agency, which is based in Paris, on Tuesday projected an average oil price of $55 a barrel for 2015, increasing only gradually to $73 in 2020. “The market does not seem to be expecting prices to revisit earlier highs any time soon,” the report concluded.

The agency’s report suggested that the fall in prices would produce a “pause” in the swelling of American oil production in recent years mostly because of drilling and hydraulic fracturing in shale fields in Texas and North Dakota. But the agency added that the price slump would “not bring it to an end,” predicting that producers would find ways to bring down costs and raise production again as prices recover.

Citi Research, in a report published on Monday, characterized the recent near 20 percent crude price recovery as “more like a head-fake than a sustainable turning point.” The Citi report projected that crude prices could still fall below $40 a barrel for West Texas Intermediate and potentially to as low as $20 before rebounding.

Andrew E. Kramer contributed reporting from Moscow.

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