Elevated Commodity Prices Won’t Fix the Oil and Gas Industry—People Will
In an article for OGGN Perspective, contributing writer Stephen Forrester explores how elevated commodity prices—whether artificially increased in the short term or here to stay for the long term—cannot solve the oil and gas industry’s problems with attracting and retaining talent. He argues that crude oil prices at above $100 mean little to the employees of oil and gas companies until average workers see meaningful change in the way they’re treated and how they’re compensated.
A friend reached out to me the other day and, as we chatted, offered this simple quip when we started talking about jobs: “Hey, I bet you’re sorry you left the oil industry now, huh?” He was, of course, referring to the fact that a confluence of many factors has led to the price of crude oil skyrocketing—as I write this, prices are hovering around $110 per barrel for West Texas Intermediate (WTI)—and that now, the golden age has returned for the oil and gas industry.
I have never more quickly said, “No.”
There is an odd misperception that elevated commodity prices are entirely indicative of the industry’s overall health. Surely with oil at record highs, the good times are upon us once more, right? This might have been true decades ago—heck, it might even have been true in the early 2010s—but nowadays, the overflowing money that once permeated the industry isn’t going to employees. I remember when I got my first job that a friend worked down the road at bp in an internal communications role, and she made upwards of $80,000 per year to do what was effectively an entry-level job. We laughed about it because she recognized how absurd it was. “Boy, oil and gas sure is great!” we exclaimed jubilantly—even though my salary wasn’t even remotely close to hers—and I’d remembered how my dad’s success as an English graduate turned mud engineer and scientist had inspired me to join the industry.
And in some cases, it really was good. A subsea BOP surveyor in Lloyd’s Register’s Drilling Integrity Services division (now Vysus Group) who was looking for a new job once cracked up when I told him a buddy of mine was hiring at Helix. “Do you think they can pay me what I’m making now?” he said, as though I would have known. “Hell, of course they can’t. I’m making $450,000 a year!” Times were good, and most technical people enjoyed salaries that had consistently grown due to their specialized skills and knowledge. Even some office dwellers could expect good pay and a decent upward trajectory; my first year at NOV, my business unit performed so well that employees got the biggest bonus they’d ever seen. I didn’t start till December, so I missed it, but seeing all my colleagues rake in the cash and then head off for holiday vacation made me think, “Could this be me next year?”
That day never came. Oil prices went down, oilfield service (OFS) companies saw their revenue consistently declining, and everyone was racing to understand what the next steps were for an industry that desperately needed to change and course-correct. The stagnation that resulted from an inability to navigate those murky waters led to layoffs and widespread dissatisfaction. ESG concerns and shareholder fury after years of lackluster returns also came to a head, with those who’d invested in the companies (individuals or institutions) demanding cash generation and better stewardship of the planet’s resources. This did not bode well for employees. I can remember opening a bonus check one year, which also contained a letter telling me I was receiving $0 for my bonus—and then congratulating me on a year of hard work. Yikes.
Fast forward a bit, and the situation was much the same. Layoff forums were abuzz with gossip on police showing up at manufacturing facilities—a sure sign of a reduction in force (RIF)—and mismanagement at all levels. Blame was thrown about with reckless abandon, but it was always this or that person’s fault that you were getting laid off. If you survived a given purge, you breathed a single sigh of relief before preparing for the possibility that the next one would finally bring your turn around, your professional life little more than an exercise in trying to avoid getting let go because of market volatility. The concept of employee loyalty died on the altar of those repeated RIFs and furloughs, with those who could do so switching industries or abandoning ship, and those who couldn’t trying their best to constantly ensure their value to the organization was well-known, thus justifying their salary, even if meager.
Now, it’s 2022, and the wild ride that is commodity price volatility has temporarily settled on the upswing. Global logistics and supply chain issues, critical resource constraints, shifting monetary policies, a pull-back in the severity of the pandemic, and the looming shadow of the war in Ukraine further escalating have caused a massive boost in crude oil prices, once again highlighting humanity’s reliance on hydrocarbons and petroleum products. Operators that were struggling before are emerging from the pits of despair and reinvesting in the infrastructure necessary to more effectively carry out their work and fulfill their obligations to their customers and shareholders. All this is happening, but what’s going on with OFS companies? Is the renaissance coming for them, too?
I would argue all these factors coming together in this way have created a situation that looks good from the outside (especially to energy industry nonparticipants) but that industry veterans can tell is a transitory state of affairs. I would further argue that even with oil prices at $110 per barrel, there will be little to no meaningful change in employee relations and talent attraction and retention at all but the most progressive of oil and gas companies. Corporate profits are at records highs across industries despite significant inflation, and growth is occurring once again in sectors previously battered by the pandemic. The rich are getting richer, as well, as reported by the Wall Street Journal: Autry Stephens, CEO of Endeavor Energy Resources, for example, is now worth more than $10 billion. How about the average employee, though, the building blocks of the organization making the whole thing possible? Are they seeing meaningful growth, either in career progress or in their total rewards package (compensation, benefits, etc.)? Everyone I’ve talked to has said they have not.
This is important because what the industry has isn’t a money problem—it’s a people problem. I’ve shouted this from the rooftops to all who would listen, oh you proud few, but I’ve seen little to no action on this front. If commodity prices being above $100 per barrel are supposed to mean that the industry is doing well again, where are the raises? Where are the bonuses, the promotions, the organizational growth? Are the companies building culture, or just proceeding with business as usual? Operators, in many cases, may be attempting to build culture, but their misguided efforts at PR cause the public to feel even greater anathema to their existence while giving employees little more than platitudes, would-be inspirational messaging scribbled on walls in cute font and pithy statements added in slide decks and marketing swag.
You cannot create culture this way, nor can you manufacture inspiration.
OFS companies are in an even more complicated situation, as they aren’t recovering as quickly—operators are still squeezing them dry, trying to extend a yearslong period of depressed pricing even further while refilling the coffers to return money to shareholders and the business itself. An already fraught relationship with talent acquisition and retention becomes more so when the business is barely self-sustaining, a phenomenon for many smaller OFS providers that struggle to stay afloat when the industry falters and budgets are cut. You can’t recruit high-level talent in this situation, and you can barely try to keep what you have—you’re on the whim of your employees and whether they can find something better sooner than later. This is true for the most deskbound of office dwellers to the most mobile of field staff—everyone always seems to be looking for that next opportunity, the big raise to push them to another level, and that often doesn’t come without an exit. Companies would rather watch someone leave and need to rehire and retrain than give that person 10 to 15% more salary. It’s true.
This may be a point where I pause and remind those who feel offended by anything I’m saying that I’m an energy industry advocate. Though I left my previous job to work outside the industry, I’m still very much tied to it via my freelance work, like this article you’re reading, or pieces for energy companies and contributions in various journals. Oil and gas also still fascinates me. I was recently reading an article about Quaise Energy and their plans to drill 20 kilometers or more into the earth—the deepest wellbore ever—to tap into natural geothermal energy in the planet’s core, where temperatures are around 932°F. If successful, the theory is that this will allow access to a virtually unlimited wellspring of clean energy, a feat that could be replicated in other locations across the world. All of this—made possible using technology for drilling oil and gas wells.
If this doesn’t sound cool to you, folks, I don’t know what will.
And that’s the saddest thing: the oil and gas industry does amazing things. I believe that except for aerospace, no other sector is as “cool” or technologically advanced. Drilling a hole into the ground and then out horizontally for seven miles to access resources that power our lives? Setting up entire subsea production systems on the floor of the ocean? Automating rigs to operate with giant robotic arms that take humans out of the equation and make them safer? Check, check, check. These things remind me why I loved the oil and gas industry in the first place, and why I still engage with and speak on behalf of it.
And yet, to continue on and attract the interest of current—and future—generations, the industry must refocus its attention on its people while simultaneously balancing financial expectations of shareholders and investors. Employees in oil and gas, whatever their position, have the same needs and wants as those in all other industries. They want to be heard. They want to have a career. They want more money for themselves and their families. They want to be known by their peers. They want people to understand what they do and why it matters. Some of these things can be, and are being, addressed by oil and gas companies, especially those that are more modern or forward-looking, as I mentioned earlier. In other areas, however, they are so sorely lacking that it’s a wonder employees stay at all.
Balance must be sought between the two extremes currently encountered by employees—on one hand, people are lured by the amazing technology and work, thinking they have a chance to make a huge difference but then finding all other aspects lacking. On the other, they are drawn in by an impressive starting salary and then find the work unrewarding or unfulfilling. In both cases, care must be taken to maintain the competitiveness of the entire package—experience, total rewards, work environment, potential for career progress—not just within the company itself and other companies within the oil and gas industry, but also relative to companies in other sectors. It’s a tall order, and there’s a lot of work to be done, but if there’s any industry able to work itself through a tough situation and emerge victorious, it’s the scrappy oil and gas industry, right?
My advice would be to always bring it back to employees, understanding what they value and what they don’t. No more talk of billionaire CEOs getting richer because WTI prices are high. No more tone-deaf marketing and PR campaigns trying to shift public opinion despite literal decades of failure in this regard. Bring it back to how your employees are making a difference in the world every day. Make sure you do market research and pay them what they’re worth so they don’t jump ship after years of wage stagnation. Stop thinking of people as numbers and more as individuals, practicing what you preach as laid out in those clever “Company Values” statements. These are all easy things for me to type, but they require the collective effort of many people in many departments at many companies. I refuse, however, to believe that this is an impossible task.
The oil and gas industry does amazing things for humankind; it’s time companies do more amazing things for their employees. Only in that way will the industry truly be made “great again.”