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Service firms ‘hunker down’

 

Posted 8/25/15 (Tue)

Service firms ‘hunker down’

By Kevin Killough
Oil producers in the Bakken are tightening their belts to stay afloat amid low oil prices. They’ve reduced drilling and slimmed down well completions to a level that draws upon an uncompleted well inventory and just barely maintains current production levels. 
In everything they continue to do, the companies are looking for ways to cut costs wherever it’s feasible to do so.
This is trickling down to companies that provide services to the industry. Some are doing better than others, but they are all feeling the pressure.
“There’s always that pressure, even when times are good,” said Bart Horner, owner of Northern Oilfield Services.
Northern is a roustabout service that operates in Northeast Montana, Divide County, and Williams County. 
He said he reduced his rates, but he’s also had to find ways to operate more efficiently to reduce his own costs.
“It doesn’t do any good to charge half what everyone else does if you do half the work,” Horner said.
At this time, he said his business is down about 50 percent over the past 18 months, but the work is still there. 
“Financially, we’re in good shape. We can weather the storm,” he said. 
Hard times
Other companies are not doing as well. 
Absorbent and Safety Solutions, which has offices in Tioga and Alexander, provides emergency spill response and environmental reclamation services. They provide responses to situations like wellhead blowouts and water releases, as well as site closures. 
The company was contracted to clean up the illegally dumped filter socks discovered this past March near Williston. 
Travis Rodgers, vice-president of business development for Absorbent, said the company is struggling in the current climate.
“It’s impacted us in that we’ve laid off two-thirds of our company,” he said.
That’s about 30 employees. Prior to the slowdown, Rodgers said the company did really well, resulting in exponential increases year-over-year for the four previous years they’ve operated in the Bakken. 
The picture has drastically changed. 
“We’re barely treading water and not making any money. If we break even this year, we’ll be lucky.” 
They continue to offer the same services, but the volume of sales is way down. Besides reducing staff levels, the company drastically cut its rates. 
“You’re almost out there doing free work,” he said. 
Resilience 
Before horizontal drilling and hydraulic fracturing were profitable, a group of entrepreneurs were betting they could make it work. There were no guarantees it would ever pay off, but they persevered and, as a result, North Dakota saw an oil boom that rivaled the previous ones. 
Kathy Neset, owner of Neset Consulting Services said resilience in the face of struggle is nothing new to the people who have been in this industry for decades. 
“These companies are resourceful. They think outside the box. They have that human resource of critical thinking. They’re not just good at fracking. They’re good at redirecting people and resources,” Neset said.
Her company, which provides mudlogging and gas detection services, was just starting out when the bust of the 1980s hit. At the time, she and her husband who cofounded the company came close to bankruptcy.  
“Those were some tough times. I remember them well,” Neset said.
But, she points out, they not only survived the bust. They continued to operate and saw explosive growth in the past few years. So, she faces these newest challenges optimistically.
She said things were much more difficult in the 80s bust and doesn’t see the current situation as being quite the same challenge. 
Production in the state continues largely unabated, and businesses that provide services on that side of things will probably be doing better than ones on the drilling side. 
“The roustabouts are not as impacted,” Neset said.
Adjustments 
At her own company, she said they’ve been trying to do what they can to avoid letting people go and keep everyone working, albeit with reduced hours. 
This has meant spreading the work around a bit thinner. So, for example, with fewer rigs operating, there may be more people working on each rig.
“That may mean fewer days on the rig but they’re still getting a paycheck,” Neset said.
Some employees elected to take a 32-hour week during the summer. It allows more time with their family and helps the company cut down on payroll. 
She said her employees are also doing what they personally can to adjust to the situation. There was a time when they would request time off for special events, like a concert. Now, those requests are uncommon. People take vacations when they aren’t needed on the rigs.
The company also has a lot of support staff -- everyone from administrative assistants to bookkeepers -- who take on duties that were previously outsourced. That means doing their own vacuuming or pulling some weeds in the garden.
“I am sure that other companies are doing some of the same things,” she said. 
None of it is easy but, she said, her employees understand the challenges everyone in the industry is facing.   
“People kind of hunker down in times like these. That’s what you should do. You adapt to circumstances,” she said.