Crude Realities

Oil rout has Louisiana's bayou businesses singing the blues

Brad Quick | CNBC
Louisiana drillers face major cuts
Louisiana drillers face major cuts
Fishing: Louisiana's fallback industry
Fishing: Louisiana's fallback industry
Oil patch ripple effect
Oil patch ripple effect

Louisiana has shed thousands of oil and gas sector jobs since crude prices collapsed in 2014, and as the slump continues, the effects are spreading across the state.

Louisiana is one of the most important oil-producing states in the nation, home to drillers that operate in shallow coastal waters, and to shipbuilders and support companies that contribute to oil operations in the deeper waters offshore.

One place the pain is now being felt acutely is the bayou. Louisiana's low-lying marshlands have been buffeted from the north as drillers deactivate onshore rigs and from the south as surveying work in the Gulf of Mexico dries up.

It's a total disaster. There's no other way to say it. We're in deep trouble, all of us, and something's got to happen.
Marc Moncla
co-owner Moncla Cos.

Louisiana's mining and logging sector, an official statistical category that includes oil and gas extraction, shed about 12,100 employees in the 12 months through January. Employment in the manufacturing sector, which is highly exposed to the energy industry, was down by nearly 7,000 positions during the same period.

Local economies from Houma to Lafayette, in particular, are feeling the pinch. Derricks are stacked up all along the highway from Houma to Morgan City. Fisherman are seeing their share of the pie shrink as laid-off oil workers flood the industry. Business is down at restaurants.

A rebound in crude prices from 12-year lows earlier this year has not yet provided relief, and bayou businessmen say oil probably needs to head significantly higher before their balance sheets look healthier.

Oil's magic number

Moncla Cos., a third-generation rig company, currently has only 2 of its 11 barge rigs operating on work sites. It weathered at least one stretch when its entire inventory sat idle for about a month.

Co-owner Matt Moncla said he was hoping demand would pick up when oil returned to about $45 a barrel, but now he thinks the magic number is closer to $60 or $65.

Even when rigs are running, day rates have collapsed from about $18,000 to $12,000, and the company has seen its revenue cut in half.

Though Gulf oil output is near highs, Moncla's clients aren't planning to bring on any new production that would require the company's services, said Marc Moncla, Matt Moncla's brother and business partner.

"It's a total disaster. There's no other way to say it. We're in deep trouble, all of us, and something's got to happen," he said.

Brothers Matt and Marc Moncla run Moncla Companies, a third-generation rig operation. They’ve had to cut their workforce by more than 60 percent as their revenues have sank 50 percent amid a protracted oil price downturn.
Brad Quick | CNBC

The underutilization and discounts have forced the company to reduce its employee count from about 650 to 250. Marc Moncla said he handled the layoffs himself.

"I know their kids. I know their husbands or their wives. I know them very well and it was a very personal thing for me to go and do that," he said.

While workers whom Moncla let go early on have found work in other industries, the cream of the crop who survived the first round of layoffs is now in dire straits, he said. By the time they got their pink slips and hit the market, there were simply no jobs left.

To make matters worse, he said he has to turn away job seekers virtually every day.

Oilmen gone fishing

During energy's boom times, Louisiana workers migrated from fishing boats to oil fields. But as the tide has turned in the energy sector, oilmen are returning to the state's waters.

James Blanchard, a shrimp boat captain and commercial fisher for the last 35 years, currently employs two men who previously worked for offshore drillers.

Before that, he took on his brother, who was also laid off from a drilling ship at the start of last year.

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Blanchard said he welcomes the return of skilled workers to the industry. But the number of vessels has fallen over the last 10 years as shrimp prices have remained depressed, so the industry can't absorb every job seeker, he explained.

"There's only so many boats, and like I said, it's only a two-man crew, so you can't hire them all," he said.

Pete Gerica, a crabber and third-generation fisherman, said it's no surprise that oilfield workers are turning up on the docks.

"The fisheries have always been the answer to Louisiana's unemployment. When the oil patch goes sour, well, everybody goes and becomes a fisherman," he told CNBC.

But Gerica is troubled by the influx. He has played a part in keeping the state's fisheries healthy for about four decades, serving as the chairman of the Crab Task Force and now as president-elect of the Lake Pontchartrain Fishermen's Association.

Pete Gerica
Brad Quick | CNBC

He says he thought that at his age — he's 63 — he'd be able to take it a little easier, but he and other fishermen in Louisiana's bayou are grappling with the impact on fisheries from major storms. They used to be able to make a living with 250 traps, but now it can take 800 to 1,000.

"If you're using more equipment to catch the same amount of product, you got a problem. But on top of that problem, we got more people that come in, so you've got even more equipment in the water," he said.

Fair-weather fishermen with little stake in the long-term health of the fishery are not always the best operators, he said. As the waters get more crowded, more fishing lines get cut and more traps get stolen. Gerica said that in a regular year, he can expect to lose about 60 traps. Already this year, he's lost 100 or so, he said, and at $45 apiece, the losses add up.

The number of traps left abandoned is also on the rise, exacerbating the problem of overfishing as crabs wander into the forgotten equipment.

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To mitigate the problem, he and others have advocated small, creative steps such as requiring fisherman to use biodegradable traps that rot if left unattended.

But Gerica said Louisiana should also change the way it manages the industry by requiring would-be fishermen to complete apprenticeships, rather than simply allowing anyone with a license to get into the business.

For Gerica, these measures are not just about protecting his livelihood and the fisheries that provide it, but the spirit of Louisiana and the vitality of its reputation, which is underpinned by its rich culinary tradition and economy.

"Part of our state is its image," he said. "Everybody looks at a laid-back place where everybody is going out and catching alligators and shrimp and crab. It's peace and harmony, so you want to keep it that way."

"If you lose the ambiance that keeps Louisiana what it is, then you lose a part of Louisiana."

Correction: This story was revised to correct the spelling of Marc Moncla's first name.