The pandemic-driven economic turmoil hit Liberty Oilfield Services hard, forcing it to drastically cut spending and lay off roughly 1,000 of its 2,400 employees.
Times are still tough, but Chris Wright, CEO of the Denver-based company, said things are looking up. Liberty has rehired many workers. Its revenue has been increasing each month since May.
And later this year, Liberty will close on its acquisition of Schlumberger’s North American hydraulic fracturing unit. In exchange for OneStim and two sand mines in Texas, Schlumberger will get a 37% stake in Liberty.
Sand is used in the hydraulic fracturing, or fracking, of oil and gas wells.
Wright said Friday that while he’s optimistic about the oil and gas industry, the deal with Schlumberger doesn’t represent “a big, bold bet” on the future.
“We think the deal is good for Liberty whether times get better, worse or stay the same,” Wright said. “There’s no cash out the door. It’s just issuing new shares. After we issue those shares, each share of stock in Liberty will effectively own more horsepower, more earnings power, more cash flow than they owned before.”
However, Wright does see signs of hope, including the rehiring of many of the employees let go when the coronavirus swept through the country and a lot of drilling slowed or stopped. Liberty’s layoffs in April were the company’s first in its nine years.
“We just simply had no choice. Demand for fracturing services dropped 85% in a two-month period, and we have to make sure the business survives so that we’re around for the long haul,” Wright said.
The company filed notice in April with the state Department of Labor and Employment that 183 workers were being let go in Adams County, where its Colorado field services are based. Since then, nearly all of Liberty’s Texas employees have been rehired, and operations have picked up in North Dakota.
But everybody in the company is still working at “meaningfully reduced compensation,” especially the top executives, Wright said.
In Colorado, operations haven’t rebounded as much because of regulatory uncertainty, Wright said. He referred to a 2019 law being implemented by state regulators that mandates an overhaul of the oil and gas rules.
Industry representatives are particularly upset with the prospect of having to locate new wells at least 2,000 feet from homes and schools. The current requirement is 1,000 feet from schools and 500 feet in some residential areas. Industry officials said bigger setbacks will increase costs and significantly limit where companies can drill.
Wright said he expects oil and gas production to remain low until the end of the year. Even before the pandemic, producers were struggling because of a glut of oil and a price war between Russia and Saudi Arabia.
“We’re not in a great place right now, but it feels a lot better to be headed the right direction,” Wright said.
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