LONGMONT,
Colo. — Convinced he can ride out the slowing fortunes of
America's oil and gas industry, Shawn Kluver arrived at Thursday's heavy equipment auction with money to spend and bets to make.
Kluver flew to
Colorado from
North Dakota on a one-way ticket, confident he'd find bargains to drive
home.
"
Everyone says we're crazy, but we're hoping to capitalize on the downstroke," he said, walking around the sprawling, dusty auction site, where more than 3,
000 bidders haggled over backhoes, bulldozers and the trucks he was shopping for, called hydro excavators.
Used oil field equipment is a bargain these days. Hundreds of drilling rigs across America are being shut down by oil companies facing low petroleum prices, putting tens of thousands of roustabouts, drillers, mudders and truckers out of work and idling the equipment used to prepare the ground. But in this downturn, just as in others, someone's pain will someday be another's gain.
The fall has been fast: The price of a barrel of the benchmark
U.S. crude known as
West Texas Intermediate closed at $43.96 on the
New York Mercantile Exchange Friday, down more than 50% from a year ago.
At the
Ritchie Bros. auction here, bidders in jeans and Carhartt pants clutched rolled-up inventory catalogs, consulting with partners and wives and bankers by phone before staking their place in the company's auditorium where auctioneers rattled off bids for a seemingly never-ending stream of rumbling diesel engines that totaled $23 million in sales. Ritchie Bros., which bills itself as the world's largest auctioneer of heavy equipment, says it's seen record-setting interest in its auctions this year, driven in part by contractors seeking bargains on oilfield equipment that can be repurposed for construction.
On the block at its
Longmont auction Thursday were more than dozen hydro excavator trucks, which use high-pressure water to clean drilling rigs and probe for buried utility lines near wells. Many of those trucks came from
Decatur, Texas.-based
H2X, which laid off 60 employees and shut down in February after oil companies stopped calling them for work, said former
CEO Mike Clark.
"I don't know how much they sold for, and I don't really want to know,"
Clark said Thursday by phone from
Texas. "The oil and gas companies pulled in their horns really fast. Everyone I talk to, they're stunned at how fast everybody reacted."
The oil and gas industry hasn't collapsed entirely. Thousands of rigs are still boring into the earth, and many workers are still benefiting from rig jobs that can pay about $
100,000 annually, according to Rigzone.com, an industry job and news site.
But a major slowdown is well underway.
Nationally, last week's count of active U.S. drilling rigs was down 40% from the same week a year ago, according to industry expert
Baker Hughes. The number fell by 56 from the previous week, with 1,069 operating as of Friday, Baker Hughes said.
The reductions are the most significant drop in drilling since 2008, said Tim Hess, a short-term energy outlook analyst with the U.S.
Energy Information Administration. Hess said oil companies are reducing drilling because there's an oversupply of oil across the world, which is driving prices down.
In the
United States, many oil companies have hydraulic fractured, or fracked, their wells, which allows them to extract oil and gas from previously unprofitable areas, helping supercharge the
American oil boom. Hess said companies are finishing the wells they're already drilling, but are only starting new ones in areas they think will be most profitable. That will lead to production declines and potentially rising prices by this fall, he predicted.
Federal energy analysts predict "very high uncertainty" about oil prices over the coming months, with
December 2015 futures for West Texas Intermediate crude oil trading between $32 and $
108 a barrel.
While oil prices and production levels remain uncertain, people are already losing their jobs.
Halliburton, one of the country's most recognizable oilfield service companies, last month announced that it will cut up to 8% of its overall workforce, or approximately 5,200 to 6,400 jobs. Baker Hughes in January announced layoffs of about 7,000 people, or 11% of its workforce. Shareholders of the two companies are voting on a proposed merger on March 27. And Schlumberger, another oilfield services company, announced in January it was laying off 9,000 people.
Kluver, the hydro excavator buyer, knows all that. He still laid down $142,000 to buy two of the trucks, which he and a colleague planned to drive 10 hours home to
Kildeer,
N.D., as fast as possible. The trucks can also be used to clean out carwashes and industrial kitchens, and Kluver plans to keep busy until the higher-paying oil industry again comes calling.
"It will come back eventually," he said. "But it will weed out a lot of people first."
- published: 22 Mar 2015
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