Low natural gas prices just keep hitting oil and gas industry workers in the Marcellus Shale. The state Department of Labor figures show 2,262 fewer oil and gas jobs when comparing quarter two of 2015 to 2014.
Cabot Oil and Gas announced in a press release a 58 percent reduction to $325 million as opposed to $774 in 2015. The company plans to drill about 30 wells in 2016. Cabot plans to drill 25 wells in the Marcellus Shale and 5 in the Eagle Ford Shale and complete a total of 55 wells. By mid-February of this year it is expected the rig count will be reduced to one total rig in the company.
According to StateImpact and Stephen Beck, a US oil and analyst for IHS, Cabot’s reduction is significant because the company operates in an area of the Marcellus that is most economically productive.
Other companies that report layoffs include Southwestern energy, with nearly 40 percent of their workforce, and Range Resources, with a reduction of 55 jobs.
Energy industry stocks dropped as Chesapeake Energy Corporation hired lawyers to restructure, Anadarko Petroleum Corporation announced a dividend reduction and Whiting Petroleum Corp’s credit was downgraded by Moody’s.
Director of the Office of Energy Markets and Financial Analysis for the US Energy Information Administration (EIA) Lynn Westfall explains a few reasons why production is declining: Low prices challenge the justification for running rigs, as production from wells decreases at an increasing rate. The lower rig count does not allow companies to keep up with the declined rate causing decreased production In addition, logistically there is not enough pipeline to remove the oil.
The oil and gas industry is not the only one feeling the pain from low prices. As companies slow down production, outsourced engineers and other related fields are also experiencing a work slowdown.
Clayton Bubeck from Rettew in Lancaster notes that the boom was just what the engineering firm needed during the recession in 2008. Instead of laying off employees they were able to hire new people and open offices. Most of their new clients, however, came from the Marcellus Shale. As those companies cut back,so does their business.
Pennsylvania state departments also see revenue and impact tax decreases with the slowed production. This revenue has become a key source of income for local governments. Meanwhile.Gov. Tom Wolf continues to advocate for a severance tax on production in the Marcellus Shale.