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The uptick in industry activity that began in the fourth quarter of 2016 means that OFS companies are back on the hunt for skilled and experienced labour—and are finding it’s a smaller and less available group than before.
“Unfortunately, many OFS company workers that left the industry are highly disillusioned about ever working again in a cyclical industry”, says Jeremy Rondeau, Vice President, Oilfield Services, for MNP.
“On the skilled labour side, they’ve either gone home — to places in Ontario or Atlantic Canada — or they’ve gone to other industries for some sort of stability. Maybe they don’t make as much or work as much, but they don’t get called out at all hours or work crazy hours and have no control over their life. They’ve had enough of the ups and downs,” Rondeau continued.
Competition for this shrunken group of skilled and experienced field personnel has been intense since the start of the winter drilling season, and industry associations and service companies have all expressed concern that the tight labour picture will keep industry in a lower gear going forward.
“We are actively adding crews and seeking to attract candidates using radio ads, referral bonuses and other techniques. Crewed equipment availability is a limitation that will take time to fix. It is a slow process to recruit and train qualified employees,” Amundson says.
Industry HR Trends for 2017
A survey of 2017 HR trends, conducted in February by Enform’s Petroleum Labour Market Information (PetroLMI), a leading resource for labour market information and trends in the Canadian petroleum industry, indicated 94 per cent of service companies planned to maintain or increase their workforce in the first quarter of this year.
Respondents were asked to comment on their top 3 workforce challenges and strategies (see below).
Although there is some renewed optimism that a modest job recovery is underway, companies are quick to point out that market conditions remain uncertain, says PetroLMI. Workforce strategies have been built around this uncertainty, while also keeping in mind that profitability relies on the ability of companies to sustain the productivity and efficiencies they gained during the downturn.
Retention and New-Hire Strategies
“The last downturn wiped out about 104,000 industry jobs across the country,” says Mark Salkeld, president and CEO of the Petroleum Services Association of Canada (PSAC).
“Layoff stats in the oilfield services sector are little harder to nail down”, says Salkeld, noting PSAC members specifically laid off about 35,000 workers.
During the downturn, many OFS companies retained as many key, experienced staff as they could, redistributing these workers through their fleets and businesses. As activity levels have increased, companies have been able to move staff back to their previous roles.
“But new hires have been needed”, Salkeld says of the just completed winter drilling season.
“They’ve put all their people on staff back to work and they have recalled as many as they could and now [they are] hiring brand new — greenhands. They may be coming from a new industry and this is their first taste of oil and gas.”
“Companies have set up their own training schools, and held job fairs in regional centres such as Grande Prairie, as well as on First Nations lands and in Eastern Canada”, he adds.
Service companies’ recruitment efforts have also included raising wages, offering guaranteed hours and providing retention bonuses. Comfortable living accommodation at camps is another attractant.
For further retention strategies, click here.
A number of OFS firms — including Trican Well Service, Canyon Services Group, Calfrac Well Services and Aveda Transportation and Energy Services — instituted variable pay models during 2015 and 2016.
Variable pay refers to compensating senior field staff on an as-needed basis, as opposed to a fixed salary, and was adopted by many industry employers to cut costs and more closely link expenses with activity levels.
“Sometimes called mercenary style or the “merc,” it’s nothing new, says PSAC’s Salkeld. The last time it was employed to any degree was in the early 1990s. While some companies adopted the method as soon as the downturn began, two-and-a half-years ago, others held off as long as they could, but eventually relented while still others kept their payroll whole to keep crews handy”, says Salkeld.
He couldn’t estimate the extent of the practice throughout the industry but said it reached throughout the service sector, including on hydraulic fracturing spreads.
The pressure pumping industry has historically experienced significant volatility of cash flows due to the fact that many field employees received fixed base salaries, magnifying cash flow losses during low activity periods.
But the variable-pay model may be showing its cracks.
In its Q4 2016 conference call held in February, Calfrac chief executive Fernando Aguilar noted the company followed others in adopting the variable-pay model for its field staff, although the company did not adopt the model “100 per cent.”
“We knew that when the market got busier and tighter, it was going to be difficult to keep that type of situation,” he said. As it turned out, the very same service industry competitors who had introduced variable pay for field staff were the ones who, in
January 2017, began paying field staff retention bonuses to ensure they would still be there for the second quarter.
“We have done the same thing,” Aguilar said. “In fact, we’re trying to go back and make sure that if [the industry] slows down, we are going to be able to retain our employees through a slow quarter, if that happens,” he said.
Important considerations for any worker are the level of compensation and the amount of hours they are guaranteed. Until potential employees have confidence that their work will continue for more than just a few months, however, tightness will remain in the labour market.
For now, service companies are rebuilding relationships with their employee base and potential workers’ base, to make sure people are still being attracted to the industry and “ensure they’ll be happy to be part of it,” adds Calfrac’s Aguilar.
“This downturn hasn’t been good to the industry in general, which is why we have to make sure the employee base that’s out there is protected, and [that] they remain with the companies,” he says. “If that’s not the case, the industry is going to have a big problem attracting people in future.”
For more information on MNP’s OFS services, contact a member of our team:
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Client Groups:Oil ＆ Gas
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