LOGA: State’s Oil Producers Shuttering at Alarming Rate

BATON ROUGE — The Louisiana Oil and Gas Association said the global COVID-19 pandemic and the drop in oil prices are gravely threatening Louisiana’s energy sector.

The second in a series of “point-in-time” surveys shows that nearly a quarter of the state’s oil related workforce has potentially already been laid off, and four in every five exploration and production companies have already begun shutting in wells.

“Our members have indicated they’ve already been forced to lay off 23% of their workforce and the large majority are now taking steps to shut in production,” said Gifford Briggs, the president of the Louisiana Oil & Gas Association. “We feared these outcomes would take place by mid- to late-May, but the crushing weight of the crisis is taking hold much quicker than expected. Without a doubt, we need federal and state policymakers to take immediate action to help mitigate further losses from these extreme market conditions.”

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LOGA said that Louisiana’s severance tax rate is the highest in the country at 12.5%, nearly four times the neighboring Texas 4.6% rate. “We’re worried about taxes and other costs that are not going down that we still have to pay as prices have cratered,” said the head of one Louisiana energy company.

Oil prices closed most recently on the West Texas Intermediate at $18.84. Louisiana’s independent producers require an average of $37 a barrel to break even. 

Further, more than half of company leaders indicated that bankruptcy or closures are likely. “We have been forced to cut salaries between 6% and 20% for our employees,” one member shared. “I as the owner have cut my salary to zero.”

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According to the Louisiana Workforce Commission and the Department of Natural Resources, the oil and gas industry employs approximately 33,900 workers operating around 33,650 oil and gas wells around the state. 

Those tens of thousands of jobs bring Louisiana families $3.2 billion in wages. According to the survey results, 23% have already reportedly had to be laid off. 

State tax revenue will also suffer drastically from the sharp decline in oil prices and staggering job losses across the state.

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This survey from LOGA’s members, which comprises 450 exploration and production and service companies across Louisiana, is below.

LOGA Survey Results

  • Members have been forced to reduce 23% of their Louisiana workforce already
  • 77.5% of operators have already begun taking steps to shut-in production
  • 97% are moderately or extremely concerned about the future of the industry
  • 51.35% said bankruptcy likely
  • 34% applied for EIDL funds, of those only 25% received the funds they expected
  • Of those who received funds, 46.67 indicted they were not enough to help them stay in business
  • Of those who received funds, 72% indicated they were not enough to avoid layoffs

“We’re one of the largest employers in Louisiana with the highest average wages,” said Briggs. “Just imagine what shut-ins and company closures mean for individuals and communities. These are real dollars and their lack is going to be felt all across the state. Of the things we can control, we must take bold action to enact immediate changes. We are looking forward to working with the legislature and the administration to figure out how to keep wells flowing and keep people employed as long as possible.”

Emergency Measures to Help the Louisiana Oil & Gas Industry Survive

  • Reduce state severance taxes for a period of one year while protecting resources for local governments via passing HB 506
  • Support the passage of SB 359 and take appropriate steps to address the government-led coastal lawsuits
  • Identify any opportunities at the federal and state level to expedite additional storage capacity

One member summed up the widespread feeling of dejection in the oil patch. “If we are truly an essential industry, we sure don’t feel like it right now.”

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