Job losses across Texas' oil and gas sector are more than double previous estimates, according to a new report from the Federal Reserve Bank of Dallas.
Data shows 8,100 jobs were lost between December 2018 and October 2019, up from an earlier estimate of 4,000. The regional reserve bank report updated earlier survey-based data from the Texas Workforce Commission and the Bureau of Labor Statistics with new numbers through the end of November.
Jesse Thompson, a senior business economist with the Dallas Fed, said it has been a challenging year for the industry overall, with a tight credit market and heavy losses for investors. Thompson said the premium that lenders are demanding is the highest it has been since 2015, and there is still a good amount of debt payments attached to oil and gas companies.
Because of an environment where financing is hard to secure, oil and gas companies have scaled back their capital expenditures, he said, with some also cutting back on operations.
"There's a lot of pieces that seem to be telling us a story that the energy industry is having a very challenging time and I think that at this point, unless something changes, 2020 is probably going to be another challenging year for the industry," Thompson said yesterday.
The previous estimate of 4,000 job losses covered the "Texas mining sector," of which oil and gas extraction is a subsector, according to Stacey Standish, a BLS spokeswoman.
Thompson noted a declining rig count in the Dallas Fed report, despite "relatively healthy well completion activity" this year. Regional drilling fell at an annual rate of 30% through November, the outlook said, while support activities jobs — which it said are mostly oil field services — declined at an annualized 6.7% through October.
Having fewer rigs means "you don't need as much staff operating out there in the oil fields," Thompson said.
Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association (TIPRO), said that despite challenging market conditions, he expects oil and gas production this year to break previous state production records.
"Oil and gas continues to be one of the strongest economic drivers in our state from an employment, production and tax perspective," Longanecker said. His group represents thousands of individuals and companies from the Texas oil and gas industry.
Longanecker said he ultimately believes that total oil and gas employment in Texas in 2019 will exceed 2018 numbers, with a decline expected in the first quarter of 2020. In the second half of 2019, he said, TIPRO anticipated a reduction of 5,000 to 6,000 jobs, primarily due to a downturn in support activities for oil and gas operations employment.
A decline in oil and gas extraction jobs comes as operators are scaling back on drilling due to a lack of capital investment, paying back more to investors and reducing debt, he said.
"This is obviously very different than the trend over the past 20 years of spending 105% of cash flow on drilling, with a core focus on increasing production, which is no longer a key metric for success with investors," said Longanecker, whose association is based in Austin.
Elizabeth Caldwell, a spokeswoman for the group Texans for Natural Gas, said that while job losses are unfortunate, "that shouldn't waver confidence in oil and gas in Texas." Caldwell said via email that Texas' oil and gas industry will play a "key part" in meeting worldwide energy demand in the coming decades.
Todd Staples, president of the Texas Oil and Gas Association, said the industry statewide employs hundreds of thousands of Texans in high-paying, desirable jobs. But while the sector has seen "tremendous growth," it's not guaranteed, he said.
"Global circumstances including price and overall economic conditions, along with strong domestic production, all influence the pace of growth," Staples said in a statement.
The Dallas Fed's Energy Indicators reports are released monthly.
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