Four Corners oil and gas industry tightens belt in face of continued slide in oil prices

James Fenton
The Daily Times

Farmington independent gas company DJ Simmons Inc. has just 10 employees and around 30 at its sister company, Twin Stars Compression. John Byrom, DJ Simmons president and CEO, said the company has not yet made significant changes but will inevitably do so by the end of 2015 if the current downward trend on the markets continues.

“We’re having to make some hard choices,” Byrom said. “We’re having to look at everything. It’s a very difficult time, and we know we’re not alone in this.”

Encana Corportation went through a corporate-wide restructuring in late 2013, reducing its workforce by 25 percent, according to company spokesman Doug Hock.

Encana has no plans for further reductions this year, he said in an email.

He said Encana has cut its spending to focus on its Canadian and Texas-based operations.

“We’ve been very disciplined in our capital spending. For example, in the San Juan (Basin), our current plan for this year is to spend $70 million to $100 million. That’s down from the $100 million to $130 million in 2015 spending we had forecast in December,” Hock said. “Over 80 percent of our total capital will be spent in four areas with the highest margins — the Duvernay and Montney in Canada and the Eagle Ford and Permian in Texas.”

At the beginning of March, WPX Energy announced that it would be cutting its workforce by 83 jobs nationally, including two in New Mexico. The company has approximately 900 employees who support its primary operations with 5,800 wells in the San Juan Basin, the Williston Basin in North Dakota and Piceance Basin in Colorado.

In a Mar. 2 press release, WPX, which has offices in Aztec, announced it would cut its workforce by 8 percent and consolidate office staff at its Denver, Colo., and Tulsa, Okla., offices.

The news of the job cuts comes after six months of falling oil and natural gas prices, two products the company produces. Crude oil has dropped by almost 50 percent to six-year lows. Natural gas, which has not reclaimed its previous pricing after its value last crashed in 2008, has been cut by a third.

“We’ve evaluated many options to adjust our cost structure, and no solution is perfect, WPX CEO Rick Muncrief said in the release. “Decisions are especially difficult when they affect people’s lives.”

The energy company also said it offered its employees a “voluntary early exit program” last year to help manage costs. Approximately 100 workers accepted the terms of the program by the end of 2014.

In February, Ken McQueen, WPX’s vice president of San Juan Basin operations, asked its contractors for a 20 percent price cut on goods and services, citing commodities markets as the reason for the request.

“I am writing to request a 20 percent cost reduction in the goods and services you provide WPX Energy ...,” McQueen wrote to the company’s vendors in a Feb. 9 letter. “WPX has enjoyed a long and productive history with our vendor community in the San Juan Basin. I hope you understand that this in no way reflects poorly on you or your company. Instead, this is my only alternative to keep a modicum of activity intact during this depressed commodity price environment.”

James Fenton is the business editor of The Daily Times. He can be reached at 505-564-4621 and Follow him @fentondt on Twitter.