Energy Firms Lick Wounds

By Allen R. Myerson N. Y. Times News Service | THE JOURNAL RECORD, September 17, 1998 | Go to article overview
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Energy Firms Lick Wounds

Allen R. Myerson N. Y. Times News Service, THE JOURNAL RECORD

HOUSTON -- This city is throwing a party for more than 30 oil ministers and 8,000 other officials and executives from at least 82 countries this week. To make sure everyone attending the World Energy Council Congress feels sufficiently welcome, the city greeted them Saturday night with a light show featuring 2 million watts of spotlights, 14 powerful lasers and 12 tons of explosives, enough to make car alarms wail all over downtown. On Thursday was what was billed as the state's largest sit-down dinner ever, requiring a banquet hall also known as the Astrodome.

But not even the local brand of relentless hospitality can make up for oil prices that nobody here wants to celebrate. So this week's gathering of the most powerful figures in world energy has become only a brief break from a new and unexpected round of cutbacks and even, in some cases, layoffs.

Just a year ago, executives griped about the bonuses they had to pay to hire and keep geophysicists. Now they wonder how to keep those geophysicists busy.

"Have you found anybody who is not cutting back?" asked former Commerce Secretary Robert Mosbacher. He recounted how the Houston company that bears his name had delayed planned drilling in Mississippi, Texas, Louisiana and several foreign nations.

Compared, of course, with the industry's roller coaster ride through the 1970s and 1980s, the 1990s might seem more like swan boats. Still, companies that boasted last year of having the slimmed- down staffs and the new oil-finding technologies to weather low oil prices are now saying that by "low" they never meant the current $14 a barrel.

"The industry is suffering from reverse sticker shock," said Daniel Yergin, the president of Cambridge Energy Research Associates and one of the meeting's featured speakers.

Pioneer Natural Resources chief executive Scott Sheffield, for example, gathered his employees Tuesday afternoon to urge them to cut every expense.

Pioneer completed about $5 billion in acquisitions last year, becoming one of the nation's largest independent oil companies. It also contracted for drilling services at top dollar. This year, to help pay down $2 billion in assumed debt, Pioneer has had to dispose of about 10 percent of its properties. Exploration and production outlays have been cut to $450 million from $600 million this year and will drop to $300 million next year.

"We were flying high until oil prices cratered," said Pioneer public relations chief Marsha Sheffield before leaving to help her husband prepare his cost-cutting appeal.

The major oil companies -- with interests in refineries, gas stations and petrochemical plants -- are more diversified and financially stronger, but not immune. Texaco has trimmed its $4.6 billion exploration and production budget by about 10 percent. Texaco chief executive Peter Bijur and his hovering publicists stressed in interviews here that the operative word was "deferred," not canceled or cut.

The oil field services companies, however, are past the point of maintaining the appearance of normalcy. Nabors Industries, the world's largest land driller, has cut nearly 3,000 workers across the oilpatch from a peak of 13,000 last fall. A year ago, Nabors had to ask customers wanting rigs and crews how long they could wait. Now the only question is, "How soon can we start?"

Among other oil field service companies, EVI Weatherford laid off 1,300 of its more than 11,000 employees this year, and Schlumberger laid off 700 of its 9,200 domestic oil field service employees through July.

Houston, and Texas more generally, where technology has passed energy as the state's largest employer, are unlikely to feel nearly the pain of the 1980's.

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