80 employees laid off in Duchesne County due to slumping oil prices

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MYTON, Duchesne County — Utah's largest oil producer laid off 80 of its 540 employees in the state on Wednesday, citing the economic challenges brought on by the continued drop in oil prices.

"Due to a low oil price and a financial responsibility to our shareholders, we had to take significant steps to protect our balance sheet and preserve our liquidity and financial strength," said Cindy Hassler, spokeswoman for Newfield Exploration Co.

In all, the Texas-based energy firm laid off 200 of its 1,300 employees nationwide, Hassler said.

"This was not an easy decision and it wasn't made lightly," Hassler said. "We had to do this for the financial security of the company."

Mark Knold, chief economist for the Utah Department of Workforce Services, said the Newfield layoffs come at a time when Duchesne County has seen a sudden uptick in claims for unemployment benefits.

This was not an easy decision and it wasn't made lightly. We had to do this for the financial security of the company.

–Cindy Hassler, spokeswoman for Newfield Exploration Co.

"New claims are typically around two to eight per week," Knold said, "but the last two weeks saw those numbers climb to around 20.

"That is not an alarmingly high number," Knold added, "but the anxiety is that it may just be a beginning wave."

Some of the new claims are being filed by people who worked for companies that provide contract services for Newfield and other oil and gas production companies in the region. Those smaller companies have felt the squeeze as energy producers have reduced their use of outside contractors.

"I think what you're seeing right now in the (Uintah) Basin is a natural response to market conditions," said Utah Petroleum Association President Lee Peacock.

"The recently announced layoffs are certainly a part of that," Peacock said. "We certainly hope that this is just a temporary setback and, depending on what happens in the world market related to the price of oil, we hope that there are better days ahead."

Those better days may be hard to find though in Duchesne County, which was recently ranked ninth on a CNBC list of the nation's 10 most oil-drilling-dependent counties, according to Knold, who conducted his own review of the data the network used.

"They were correct," he said.

The network's analysis found that 10 percent of Duchesne County's base employment comes from the energy industry, Knold said. By contrast, the national average is less than one-tenth of a percent, he said.

"Diversifying an economy would be preferred, but you cannot artificially build economies," Knold said. "Economies are built around competitive advantages, and in Duchesne County's case, it is having a supply of oil."

After recovering from the 2009 slowdown in oil and gas production, Knold said the drastic drop in international oil prices over the past several months could hit the county harder than other parts of Utah.

We will need to see a significant increase in oil prices, and a reduction in service costs and field-level expenses, so we can make a reasonable return on our investment in the Uintah Basin.

–Cindy Hassler, spokeswoman for Newfield Exploration Co.

"I think we could see job losses there blossom," he said. "It could have a powerful effect on the local economy, but we're probably not going to see that reflected in the larger Utah economy."

Numbers compiled by the Department of Workforce Services show that just less than 50 percent of Duchesne County's energy workers live in the Uintah Basin. Most travel from the Wasatch Front or neighboring states to work in the oilfields, Knold said.

"Not every job loss is going to have a direct impact on the local economy in the Uintah Basin," he said, before adding that the lost spending by workers from outside the area will "be a setback to the Uintah Basin's merchants and other service-related industries."

"Grocery stores, restaurants and gas stations may see at the least reduced sales, if not some actual employment layoffs," Knold said.

In additions to Wednesday's layoffs, Newfield announced that it will not drill any new wells in Utah until oil prices rebound.

"We will need to see a significant increase in oil prices, and a reduction in service costs and field-level expenses, so we can make a reasonable return on our investment in the Uintah Basin," Hassler said.

Any wells that are already in the process of being drilled will be completed, Hassler said. Once that work is finished, the company's drilling rigs will be laid down, she said.

"We are doing everything we can in the downturn to look at ways to reduce our operating expenses and improve our margins," Hassler said. "This includes working with our partners — as well as local, county and state officials, the BLM and the (Ute Indian) Tribe — to find innovative ways to improve our returns in Utah so we are ready to resume activity when oil prices recover."

On Thursday, U.S. crude oil futures dipped below $44 per barrel for the first time since 2009, before closing at $44.53. Black wax crude oil — the predominant type of oil found in the Uintah Basin — has averaged just over $30 a barrel for the month of January.

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Geoff Liesik


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