Download Person, place or thing? What goes first when oil

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Person, place or thing? What goes first when oil
and gas companies shed assets?
November 10, 2015 12:30 AM
By Anya Litvak / Pittsburgh Post-Gazette
Crowd a bunch of turnaround specialists in a room and get them talking about the oil and gas industry, and the talk can get
pretty blunt, pretty fast. Especially at a time when the industry is watching commodity prices fall and credit tighten.
“You’ve got to start cutting your head count,” said Jay Krasoff, managing director of Houston-based Chiron Financial Group
Inc. at a recent conference in Pittsburgh. “You don’t need 15 guys in engineering. You don’t need the office in Denver. You
don’t need 18 sales guys out there.
“The only place someone just out of high school is making $350,000 a year is in the oilfield,” he said at the first ever
Turnaround Management Association’s Energy Summit last month at PNC Park. “You’ve got to get the salaries cut back.”
Oil and gas operators don’t want to listen to that advice, he said. And not everyone thinks they need to take it, even during
a relatively bleak period in an industry used to booms and busts.
“Typical investment bankers,” scoffed Mark Welch, a Pittsburgh-based principal with Chicago-based MorrisAnderson.
“They’re always looking at cutting people. That’s the last thing you should start cutting.” He’d rather see companies sell off
idle assets.
A large chunk of public exploration and production firms have done both over the past year. They’ve cut staff and
announced asset sales, or a pipeline of assets they hope to sell to raise cash. The same is true for oil and gas service
companies.
From the international players — Halliburton, Schlumberger, Chevron — to the regional names like Cecil-based Consol
Energy Inc. and Ohio’s Stingray Pressure Pumping, tens of thousands have been laid off across the industry.
The problem with getting rid of people, Mr. Welch said in an interview this week, is that you might have to bring them back.
Oil and gas skills aren’t easily transferable to other businesses, he warned. “Once they’re gone, they’re either going to go
somewhere else (in the field) or into another industry — and they won’t come back.”
Headcount reductions are a quick way to add to the bottom line, he said. And the money behind the company tends to
reward it.
“The goals of banks and investors compared to the company are not always aligned,” Mr. Welch said. “Banks always want
to look at the easiest outcome.”
Dan Beck, vice president of global sales at Liquidity Services, Inc. in Austin, Texas, said at last month’s conference that
another quick way to boost a company’s cash position is to analyze what equipment it isn’t using and sell it.
“What do you have that’s worth real money today and how can we turn that into cash flow?” he said.
A few weeks ago, he helped a distressed company sell more than $1 million worth of pump jacks.
“It’s common in the industry that people are the problem,” Mr. Welch said, “and actually people are your best resource.
They’re the ones that can keep the company running.”
Anya Litvak: [email protected] or 412-263-1455.
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