Oil rigs hang on to workers

When Grey Wolf Drilling Co. announced recently that it would lay off 1,700 workers, Freddy Garcia feared that his flush times in the oil field might be over.

His worries were well founded: job cuts have been widespread in the oilpatch as crude oil prices tumble and rigs are shut down. In 10 years, Garcia, 35, had risen to the top of his field, supervising a crew of three workers and earning $13.50 an hour in shifts often 12 hours long.

But to his surprise, Garcia was kept on the payroll, even though his crew had no work with its rig at the end of the year. The company transferred him to another rig that was still active. "I got a wife and kids," he said. "I want to pay my house off. When they call, I tell my wife, `Give me that phone; I'm ready to work.'" And Garcia was not the only one. Instead of laying off all its rig crews, Grey Wolf decided to keep about 400 of its best and most- skilled workers on the payroll. The practice by oil services companies -- including Grey Wolf, Global Marine Inc. and Rowan -- to hold on to some rig workers even when there is not enough work is a significant departure for a cyclical industry that is used to letting people go at the first signs of a slump. Garcia and the other rig workers still employed are the exceptions. Tens of thousands of oil workers have been laid off in the last six months. The number of oil and gas rigs operating in the country continue to slide. The number of rigs fell to 544 as of Feb. 12 from 558 the previous week and down from 972 a year ago, Baker Hughes said on Friday in its weekly survey. It was the fourth consecutive week the number has reached a record low, said Baker Hughes, which has been counting the nation's rigs since 1944. Some companies, however, have decided to hold on to a core of workers to man the rigs until crude oil prices recover and demand for rigs picks up. "We've learned from the previous downturns where most companies simply reacted to declining revenue and just cut people accordingly," said Gary Lee, the vice president for human resources at Grey Wolf. "We're trying to plan for the return of the good times." At Rowan, E.E. Thiele, a senior vice president, said that the company had about 11 rigs that were not in operation, yet each rig was manned by 65 employees, who were making repairs and upgrading equipment. That meant that about 700 workers were being kept on the payroll although the company was not getting any revenue. "You can do that as long as you have cash," he said. When times are good, Rowan adds to its reserves, which currently total $100 million. Thiele said this policy will end up saving money in the long run. "The crews get used to working together, which means you have fewer accidents on the rigs" he said. "When things pick up, you have trained people, which means you save on the training costs." Indeed, fresh in the memory of the management of oil service companies is that only a year ago the oil industry was scrambling to find skilled workers to man rigs, which were in high demand. Day rates, the cost of renting an oil rig per day, were at record levels. The industry was plagued with safety and quality problems as companies hired inexperienced workers. As the labor pool dried up, many companies were forced to turn to experienced but less desirable workers who had poor work records. To cope with the shortage of workers, many companies set up expensive training programs. Some added more supervisors to handle crews on the more sophisticated offshore rigs, which can cost more than $100 million to build. One mistake can end up disabling a rig, causing a huge loss of revenue if it is idled for repairs. The labor shortages and problems became so severe last spring that some companies ended up having to turn business away. With each downturn, the oil industry has seen its pool of workers shrink. From the boom times in the early 1980s, when there were more than 400,000 oil field service workers, the industry has gone into a protracted slump of close to 10 years. Hundreds of companies went bankrupt or were taken over. Tens of thousands of skilled workers have retired or gone into other fields. Today, there are about 200,000 employed oil service workers, according to the Bureau of Labor Statistics. But the shrinkage of the oil service industry also means that the smaller fleet of rigs is hired very quickly when demand picks up. Thus, Grey Wolf wants to hold on to workers like Garcia for when the good times return. Garcia demonstrated his skill on a recent day as he maneuvered a two-ton drilling weight like a feather to add a piece of pipe after the crew had reached 6,000 feet in Rosenberg, Texas. At the end of the 12-hour shift, during which he sometimes took refuge in a little cabin atop the rig to escape the cold wind, he prepared dinner for his crew. He has always been eager to work the 12-hour shifts for seven days straight, even willing to take on extra work on his days off, for which he gets paid extra. "When they call I'm ready to work," he said in telephone interview from his home, a house on 10 acres of land in Ricardo, Texas, about 45 miles south of Corpus Christi. He recently built a barn for his horses. The oil service industry, however, remains under pressure. There is little chance that crude oil prices will recover soon, and the stocks of oil service companies have fallen sharply. The Philadelphia oil service sector index is down 59 percent from the 52-week high it reached on May 4. As a result, most oil service companies are still digging in for a long-term slump: slashing their costs and letting thousands of workers go. "Tough times are ahead," said Bob Rose, the president of Global Marine. But others are preparing for when demand picks up. A school for oil service workers in Abilene, Texas, was reopened a year ago by the Texas Engineering Extension Service of Texas A&M University. The current class has 11 students, and Wayne Davis, who runs the school, is optimistic they will find jobs. "There's going to be a scarcity of skilled employees," he predicted.

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