Oil rout and OPEC reverse surge in energy jobs market

Black gold drew hundreds of thousands of workers to oilfields in the United States and elsewhere during the shale revolution. Now pink slips are sending many of them packing.

A protracted downturn in energy prices has sharply reversed the fortunes of America's oilfield workers. After years of strong employment gains that outpaced total private sector growth, the energy sector became the biggest job cutter of 2015.

Layoffs by U.S.-based energy companies have hit nearly 93,800 jobs year to date through November, according to data from outplacement firm Challenger, Gray & Christmas. That represents a staggering increase of more than 700 percent over the about 11,500 job cuts in the same period last year.

It's important to note that some companies have overseas operations, so not all of those layoffs hit the United States specifically. And just how many jobs the American shale revolution is responsible for creating in the first place is a topic of debate, though employment growth within the industry has been significant.

Total U.S. employment in the oil and gas extraction, drilling and support services sectors reached greater than 644,000 jobs at the end of 2014, more than doubling over a 10-year period, according to CNBC analysis of Bureau of Labor Statistics data.

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OPEC's decision last year to maintain output and defend market share — a strategy that the cartel reiterated on Friday — put the burden of balancing oversupply squarely on the shoulders of U.S. drillers and other producers of higher-cost crude. On Friday, OPEC rolled over that policy, sources told Reuters.

Crude prices are down roughly 60 percent from their highs during the summer of 2014.

At the root of the payroll reductions is the industry's cut in capital spending. With revenue falling in lockstep with oil prices, exploration and production companies are slashing costs and wringing more productivity out of existing wells, obviating the need for workers.

Capital expenditures in the S&P 500 energy sector fell 23.8 percent year over year through the second quarter, according to FactSet. More than 75 percent of companies in the sector decreased expenditures in the second quarter.

"Capital expenditure is the absolute oxygen that drives the upstream sector," said Tobias Read, CEO of energy recruiting firm Swift Worldwide Resources. "As soon as those projects come to an end, there's pretty much nothing left for people to do."

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Drillers have also protected their balance sheets by securing deep discounts from oilfield services firms. Those firms serve and support exploration and production companies, which actually buy and develop mineral assets and make money by producing crude.

Producers also have reduced the number of rigs they operate in their fields by nearly two-thirds, so there is less work for contractors. That has resulted in deep cuts at U.S.-based services firms.

Swift Worldwide puts total layoffs around the world over roughly the last year at just more than 233,000 — including an estimated 30,000 cuts not publicly announced — as of Nov. 11. The firm now expects global layoffs to eventually exceed 300,000.

It's difficult to pinpoint where exactly job cuts have taken place because many of the employers shedding positions work internationally, but Read said the lion's share has hit the United States, Canada and Great Britain.

A breakdown of Swift's list of global layoffs makes clear how much more pain oilfield services firms have felt compared with exploration and production companies.

A jobs recovery will likely take time to gain traction after oil prices bounce back. Even in the quickest cases, it takes about six months to reach a final decision on complex oil projects, Read said. It takes another year for companies to complete engineering and design and to begin the construction phase, which creates the majority of the jobs, he said.

With oil prices projected to remain low, Read expects the employment situation to remain tough throughout 2016 and into 2017.