The global pandemic caused by COVID-19 and the oil glut generated by the Saudis and Russians have created a perfect storm, undermining any chance of a rapid recovery for the American energy sector.
But a new survey conducted by the Louisiana Oil and Gas Association (LOGA) reveals the back-to-back knock out punches could prove to be potentially fatal for many independent energy producers and service companies and the thousands of workers they employ across the state.
In an effort to begin assessing and quantifying the severe economic impact, LOGA concluded the first in a series of “point-in-time” surveys of its membership last week, which comprises 450 companies across Louisiana. The results are sobering.
The survey shows that without some kind of emergency relief, energy producers may be forced to shut-in more than half of the wells they currently operate in Louisiana and potentially reduce their workforce by as much as 70 percent over the next 90 days.
Some company leaders indicated they are also contemplating bankruptcy. “We’re doing everything we can to keep the doors open,” the head of an independent producer shared. “If this persists without any assistance, we’re going to see massive amounts of job losses in our sector.”
According to the Department of Natural Resources, there are 33,650 oil and gas wells currently operating in the state. As many as 16,800 of those could be shut in according to survey respondents.
The operation of these wells directly employs approximately 33,900 workers according to the Louisiana Workforce Commission’s most recent quarterly report. Based on survey projections, more than 23,000 jobs, which generate $2.2 billion dollars in earnings annually, are at immediate risk.
“Our members are doing everything they can to keep their doors open and protect their workers, whose livelihoods are at risk,” Gifford Briggs, President of the Louisiana Oil & Gas Association said. “But if prices don’t recover above $40/bbl by June first, my members have told me it’s going to be devastating. We cannot do this alone.”
State tax revenue will also suffer drastically from the sharp decline in oil prices and staggering job losses across the state.
Emergency Measures to Help the Louisiana Oil & Gas Industry Survive:
• Suspend state severance tax collections for a period of one year while protecting vital resources for local governments
• Support the passage of SB 359 and take appropriate steps to bring an end to the government-led coastal lawsuits
• Ease regulatory burdens at the Office of Conservation and lease requirements on state lands
• Identify any opportunities at the federal and state level to expedite additional storage capacity
“Our industry is facing the same challenges that every business is in regards to COVID-19,” Briggs said. “However, we are also having to adjust to the complete collapse of the prices of the products we sell, full storage facilities and a geopolitical war being waged against us,” Briggs said. “Without bold and immediate action from the federal and state governments, many independent energy producers and service companies may not survive this crisis. We need Governor John Bel Edwards, our U.S. Congressional delegation and our state legislature to continue to take action to help protect our workers and the survival of our industry.”