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Fifth Circuit Holds Highly Compensated Oilfield Workers Paid a Day Rate are Entitled to Overtime
The day-rate tool pusher earning $963.00 per day is not exempt from the overtime provisions of the Fair Labor Standards Act (“FLSA”) – in other words, he or she is entitled to overtime pay. So holds the Fifth Circuit.
The oil and gas industry has waited anxiously for the full (en banc) Fifth Circuit to re-consider the Hewitt v Helix Energy Solutions Group decision. Yesterday, the majority held that the Highly Compensated Employee (“HCE”) overtime exemption was not applicable to an employee paid a day rate, even when his or her total compensation exceeds the HCE salary threshold (then $100,000 per year) and the worker performs exempt duties. An individual paid a day rate (even a very high day rate) does not meet the “salary basis” prong required of the U.S. Department of Labor’s overtime exemption regulations. The decision can be accessed by this link.
'Eye of fire' in Mexican waters snuffed out, says national oil company
A fire on the ocean surface west of Mexico's Yucatan peninsula early on Friday has been extinguished, state oil company Pemex said, blaming a gas leak from an underwater pipeline for sparking the blaze captured in videos that went viral.
Bright orange flames jumping out of water resembling molten lava was dubbed an "eye of fire" on social media due to the blaze's circular shape, as it raged a short distance from a Pemex oil platform.
The fire took more than five hours to fully put out, according to Pemex.
The fire began in an underwater pipeline that connects to a platform at Pemex's flagship Ku Maloob Zaap oil development, the company's most important, four sources told Reuters earlier.
Judge drops key charge in rig fire that killed 5
A federal review commission has dismissed the main charge that worker safety officials brought against an oil and gas company for a 2018 Oklahoma well explosion that was one of the deadliest episodes of the shale drilling era.
In a ruling that became final late last week, an administrative law judge ruled the Occupational Safety and Health Administration (OSHA) failed to prove Patterson-UTI Drilling Co. violated what's known as the "general duty clause" — a catchall provision that requires employers to provide a safe workplace, even if no OSHA standard was violated.
The decision highlights the absence of a federal safety standard for oil field work, a gap advocates and OSHA have sought for decades to close. Patterson will still pay a fine for other, specific safety violations.
"This is one more example of a tragic weakness in the OSHA law: The agency's standard-setting process is broken," said David Michaels, a professor at the George Washington University School of Public Health who ran OSHA during the Obama administration.
Shale Rig Owner Touts New Price Model as Drilling Speeds Up
The biggest provider of oil and gas rigs to the U.S. shale patch is pushing a new pricing model as speedier drilling cuts into contractors’ revenue.
Rigs are typically rented out at a daily rate for a period of a few months, which has meant less money for oilfield service providers as drilling becomes quicker and more efficient. So Helmerich & Payne Inc. is touting a new pricing model based on overall well performance, and almost a third of its U.S. rigs are now being leased on that basis, Chief Executive Officer John Lindsay said Wednesday on an earnings call.
“The industry really has to evolve,” Lindsay said. “We’re really focusing on a lifetime value of that well bore for the next 10 or 15 years, and I think that is really drawing some attention. We’re seeing some opportunities to continue to grow these new models with our customers.”
After the worst crude-price crash in history pummeled the oil industry, the tussle between producers and contractors over the cost to drill and frack wells has taken on greater urgency. Explorers are under increasing pressure to cut spending and return cash to shareholders, and drilling is becoming vastly more efficient as a result.
Fracking Ramps Back Up As Crude Oil Becomes A Hot Commodity Again
The slow but steady growth seen by the U.S. oil and gas industry throughout the final four months of 2020 intensified in January, as oil prices saw double-digit increases.
Since January 1, the price for West Texas Intermediate has risen from $48.52 to over $58 as of this writing on February 9, a gain of more than 20%. According to Otavio Costa, a portfolio manager at Crescat, this is the strongest year-to-date performance for crude oil prices in the last 30 years.
The stronger price scenario has, as it generally does, led to rising numbers of active drilling rigs and frac spreads in the U.S., as upstream companies redirect more capital spending to their drilling programs. Last week, Baker Hughes reported that its rig count rose for the 11th straight week, and 22nd of the last 23 weeks. The total number of active oil and gas rigs in the U.S. as of last Friday is now 392—or 398 less than the same week last year.
Thus, the industry has now recovered to almost half the active rigs of a year ago, but that is more than twice the number of rigs that were active as of September 1, 2020. That’s an obvious sign of recovery, and the same is true in the Primary Vision count of active frac spreads currently working. That count as of Feb. 5 sat at 175 active fracking crews and equipment arrays working in the U.S., up from 85 as of Sept. 1, but 45% below the level of a year ago.
Oil and gas workers fight to regain footing during oil bust
Merlin McCalister has worked in oil for 23 years. He’s been here before.
“It’s not my first time going through the roller coaster of the oil and gas industry,” McCalister said,
But he hasn’t been here before.
“I didn’t think it was going to be this bad, but once COVID crossed over the water and got to us here, I knew we were in trouble,” he said.
COVID-19 caused an already bad situation to get worse. In April, crude prices went belly-up, falling more than 300% in a single day.
“The personnel on the rigs started getting let go,” McAlister said. “Some of our rigs started stacking up. Some of the guys started getting sick on the rigs. So, there was no work for us.”
By the middle of summer, McCalister lost his job as a safety specialist. With five kids to support, money got tight.
“Very little Christmas and no birthdays this last year, pretty much.”
And while his children took it in stride, it was McCalister who worried.
200 workers stranded on Petronas oil rig after Myanmar coup
Around 200 workers on a Petronas oil rig have been left stranded in the Andaman Sea since the Myanmar military staged a coup earlier this week.
Mingguan Malaysia reported that workers on the Yetagun oil rig have lost contact with ground control and the Malaysian embassy since Monday.
One worker, who has been on the platform for four months, expressed concern over their declining food and gas supplies, which are only expected to last them until Feb 10 or 11.
According to the staff member, all workers were hired by a contractor working for Petronas and have had to stay out at sea longer than the usual 40-day period since the Covid-19 pandemic.
While some of them have successfully been sent ashore, many were still waiting for a helicopter to pick them up.
Oil rises 1%, hits highest in a year on growth hopes, OPEC+ output cuts
Oil prices rose about 1% on Friday, after hitting their highest in a year and closing in on $60 a barrel, supported by economic revival hopes and supply curbs by producer group OPEC and its allies.
Oil was also supported as U.S. stock markets hit record highs on signs of progress toward more economic stimulus, while a U.S. jobs report confirmed the labor market was stabilizing.
Brent crude ended the session up 50 cents, or 0.9%, at $59.34 after hitting its highest since Feb. 20 at $59.79. U.S. crude settled up 62 cents, or 1.1%, at $56.85, after reaching $57.29, its highest since Jan. 22 last year.
U.S. crude futures gained about 9% this week, the biggest percentage gain since October, in part due to U.S. inventories last week dropping to levels last seen in March.
Brent rose about 6% for the week.
“Brent is eyeing the $60 level now that OPEC+ has successfully eased most supply side concerns and optimism on the COVID front improves globally,” said Edward Moya, senior market analyst at OANDA in New York.
Drilling and completions expert Patterson UTI Corp. is running 70 rigs today across the Lower 48, up three from the January average, and more equipment is likely to ramp up in the months to come, CEO Andy Hendricks said Thursday.
Hendricks, who discussed the outlook during a fourth quarter conference call, said the company’s rig count should remain “flattish” through the end of March.
“But it’s not a top, not a plateau,” he told investors. ‘It’s just where the quarter is going to land as we look forward to the rest of the year. I anticipate we’ll be putting up more drilling rigs.”
In addition, the rig dayrates are rising, with a forecast they will average $21,000/day in 1Q2021, up from the past couple of quarters.
“We thought that we would see a margin bottom for our business sometime around the fourth quarter or first quarter,” the CEO said. “Our visibility right now is that this is likely the first quarter, and that we should see improving margins throughout 2021.”
Management’s optimism about 2021 prospects is not based on where West Texas Intermediate (WTI) oil prices are trading today, he said, “but based on where WTI was trading earlier in the quarter.
Dominated by Texas, U.S. Oil, Gas Jobs Plummet in 2020, with Output Seen Trending Down in ’21
The U.S. oil and gas industry shed more than 160,000 direct jobs in 2020, with nearly half of those losses coming in Texas amid the fallout of the coronavirus pandemic, an annual assessment of the sector shows.
In its State of Energy Report, the Texas Independent Producers & Royalty Owners Association (TIPRO) said the oil and gas industry employed 902,223 workers last year, down 160,323 from a year earlier. In Texas, the nation’s largest state for energy employment, the industry supported a total of 347,529 direct jobs in 2020, down 73,982 from the previous year.
The pandemic jolted the industry in the spring of 2020, when government lockdown orders — imposed to slow the spread of the virus — froze travel and choked off demand for transportation fuels made from oil. Crude prices plummeted last April and producers quickly curtailed output in response. Production declines necessitated spending cuts and layoffs that resulted in the notably smaller workforce.
Oilfield workers respond to uncertainty
President Joe Biden recently issued executive orders on climate change, which included suspending new oil and gas leasing on federal land and directed the federal government to conserve 30% of federal lands and water by 2030.
Oil and gas workers said they are on edge about what this means for their employment and the future of their fields despite the Gov. Greg Abbott Executive Order aimed to protect Texas' energy industry from federal overreach
David Hamm of Palestine is a union pipeline x-ray technician who worked on the first Keystone line in 2010. He said he was hoping to have the opportunity to work on the second line, those hopes have dissipated.
After a painful 2020, in which he only worked two weeks, he is hopeful to get back to the oilfield this year.
“I typically work 10 or 11 months a year, but last year, due to COVID-19 and the presidential election, things were extremely slow,” Hamm said. “I’ve learned to save my pay and make it last, however, I didn’t expect to be out of work as long as I was. So, I also had to apply for unemployment and I’ve been using my one-ton work truck to haul RVs for extra income. I’m hoping to get a call from the oilfield by March.”
Hamm said he is not sure how Biden’s order will affect the oil and gas industry, but is concerned as he awaits the call back.
“Union jobs, like the Keystone pipeline, are typically federal land lease projects,” Hamm explained. “Shutting down projects like this doesn’t only hurt the oilfield and gas workers, it also hurts the communities around these projects. When oil and gas crews are working in an areas, we typically buy local. The tax money from what we spend helps that local economy flourish. When you take that away, you take away civic and community growth.”
Chesapeake Energy cuts 15% of workers mainly at Oklahoma City
U.S.-based shale oil and gas producer Chesapeake Energy plans to cut 15 percent of its workforce as it closes on new financing that will allow it to emerge from bankruptcy court protection next week, Reuters reported.
Chesapeake, once the second-largest U.S. natural gas producer, was felled by a long slide in gas prices. The company is resetting business to emerge a stronger and more competitive enterprise, Chesapeake CEO Doug Lawler said in an email sent to employees.
Most of the 220 layoffs will happen at the Oklahoma City headquarters.
Chesapeake on Tuesday said it planned to raise $1 billion in notes to complete its bankruptcy exit.
The company’s bankruptcy plan was approved by a U.S. judge last month, giving lenders control of the firm and ending a contentious trial.
Biden administration pauses federal drilling program in climate push
U.S. President Joe Biden’s administration has temporarily suspended oil and gas permitting on federal lands and waters in the latest of a series of rapid-fire orders aimed at fighting climate change and tamping down the U.S. fossil fuel industry.
The order appeared to be a first step in delivering on newly sworn-in Biden’s campaign pledge to permanently ban new drilling on federal acreage. Federal leases account for close to 25% of the nation’s crude oil output, making them a big contributor to energy supply but also to America’s greenhouse gas emissions.
Biden’s predecessor Donald Trump had sought to maximize production of oil, gas and coal on federal acreage, and routinely downplayed threats from global warming.
The suspension was welcomed by environmentalists but derided by the oil and gas industry, which is struggling to secure a future under a new administration that has vowed to make countering global warming a top priority.
Blaze erupts at Russian oilfield after well blowout
Accident dashes hopes of regional oilfield service provider to become oil producer in challenging operating environment
Russian authorities are battling a blaze following a blowout at an exploration well in the Orenburg region, where a regional oilfield services provider has just started making forays into becoming an oil producer.
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The blowout occurred on the Tallinsky block in the Grachyovsky district in early hours of Wednesday, according to a regional department of the Russian Emergency Situations Ministry in Orenburg.
Additional firefighting crew and protective equipment are being mobilised to the site in an attempt to extinguish the blaze, which has reached an estimated 25 metres in height, according to the department.
The fire involves a mixture of oil and gas.
Locals injured in protest after fire-hit India well finally abandoned
Oil India Limited needs to perform biodiversity impact assessment ahead of extended-reach drilling in environmentally sensitive area
Several people, including a magistrate, have reportedly been injured in the latest protest against Oil India Limited (OIL)’s Assam oilfield blowout days after the state-owned operator finally capped and abandoned the ill-fated well.
OIL on 3 December abandoned the Baghjan-5 well in Tinsukia district but locals are still protesting, demanding compensation for damage caused by the blowout and subsequent explosion and fire.
Several people were injured during a protest on Saturday after police used tear gas and wielded batons to disperse demonstrators, the Press Trust of India reported.
Eighteen protestors were arrested in connection with the incident.
