Those Who Cut The Deepest Will Staff Up The Quickest [2 Charts]

In the first months of the downturn, we began warning that a workforce designed for $100 oil is not the same one needed at $50 oil. However, the oilfield service industry right sized extremely quickly to lower activity levels over the past two years. We’ll soon see just how surgical these cuts were.

Now that oilfield activity is increasing at $55 oil, those who overshot workforce reductions to protect margins and financial liquidity will soon find themselves chasing labor again. This could lead to widespread wage inflation this year. In fact, it’s already begun. This nugget buried in RPC Inc.’s latest 10Q is case in point. RPC Inc. is a mid-sized US leveraged oilfield service provider.

During the third quarter of 2016, however, the Company began to experience upward pressure on the price of labor, due to increased oilfield activity and a shortage of skilled employees caused by the industry’s headcount reductions since the first quarter of 2015.

Expect to hear similar statements echo across the service industry as companies start conducting earnings calls in a few weeks. The extent of the inflation will be a function of how many skilled workers permanently left the industry.

Job postings are already rising and the companies that will be hiring back the quickest will be those most leveraged to rising field activity.

A good way to gauge who needs to staff up the quickest is to look at the depth of the cuts during the downturn. As the cycle turns, these companies will likely need to hire back staff the fastest.

In this update, we’ve quantified peak to trough head count reductions for publicly traded companies across the oilfield supply chain to give readers an idea of who cut the deepest in the downturn.

This information could help industry consultants, recruiters or displaced skilled workers find their next opportunity.

There’s a lot more to this story…

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