A sober Christmas for oil sector

Oil services, drilling and supply companies are bearing the brunt of the industry's downturn and account for over three-quarters of layoffs.
Oil services, drilling and supply companies are bearing the brunt of the industry's downturn and account for over three-quarters of layoffs.PHOTO: REUTERS

Party industry feels the pain as oil and gas firms opt for restraint amid crude price fall

HOUSTON • The Grinch nearly stole Christmas in the oil patch.

Thanks to the lowest crude and natural gas prices in more than a decade, Norwegian oil and natural gas producer Statoil has cut its holiday party budget by about 40 per cent from last year.

KBR and Marathon Oil opted for smaller affairs with less swank. One Houston hotel said its seasonal party business is down 25 per cent from 2014. Pricey wine and champagne are off the menu.

The industry has shed more than 250,000 jobs and idled more than 1,000 rigs as crude prices fell by more than half since last year.

Oil services, drilling and supply companies are bearing the brunt of the downturn and account for more than three-quarters of the layoffs, said consultant Graves & Co.

INDIGESTIBLE

You can't have a US$2 million Christmas party while at the same time laying off half your workforce.

MR JORDAN LEWIS, an operations manager and producer at Sullivan Group, a Houston event planning company

"You can't have a US$2 million (S$2.8 million) Christmas party while at the same time laying off half your workforce," said Mr Jordan Lewis, an operations manager and producer at Sullivan Group, a Houston event planning company.

Independent power generators have also been stung by cheap electricity amid declining gas prices. The heating and power plant fuel slid recently to the lowest level since 1999, and is heading for the biggest annual drop since 2006 as the lack of demand leaves stockpiles at a seasonal record.

The commodity rout and the layoffs that followed have dampened holiday festivities.

Several hundred Statoil staff were invited earlier this month to a park for a party that featured scaled-back entertainment and decor, spokesman Peter Symons said.

At the Houston-based oil and gas construction firm KBR, management cancelled this year's company party. Instead, individual departments were encouraged to hold their own gatherings.

Spokesman Brenna Hapes said: "We are certainly being cost-conscious. There's also the added benefit of some team strengthening as well. Employees are spending time together with their colleagues in small gatherings, and that's a good thing for our team."

Marathon Oil did not host a big party for reasons that were "along those same lines" as other firms, spokesman Lee Warren said, without elaborating. Spokesmen for other oil and gas majors, including Chevron and BP, declined to comment. The cutbacks on entertainment have hit restaurants, hotels and other venues that rely on a boost in corporate spending during the holidays.

Ms Ellen Jannik, event coordinator for Vic & Anthony's, said the popular Houston steakhouse has been soliciting other corporate clients after oil and gas companies began downsizing holiday parties.

Most are "cutting back on the guest list, with some lower attendance groups", Ms Jannik said. "We started reaching out to other industries."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on December 25, 2015, with the headline 'A sober Christmas for oil sector'. Print Edition | Subscribe