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Dallas Fed paints bleak picture for Texas oil, gas jobs in revised data

The Texas oil and gas extraction and services sector has faced mounting job losses in the second half of the year, and it could be worse than it first appeared.

Employment data benchmarked by the Federal Reserve Bank of Dallas shows that the number of jobs lost in the Texas mining sector, which includes the oil and gas extraction and services sectors, was double what is being shown by data from the U.S. Bureau of Labor Statistics.

Using preliminary releases of data from Quarterly Census of Employment and Wages, the Dallas Fed said the Texas mining sector lost 8,100 jobs from December 2018 to October 2019. That is double the nearly 4,000 losses reported by the Bureau of Labor Statistics, which uses a payroll employment series known as the Current Employment Statistics, or CES, to determine its figures.

The Quarterly Census of Employment and Wages data is the primary source of employment data that compiles information from unemployment insurance records. It covers about 97% of nonfarm payroll employees, and data for the remaining 3% of nonfarm employees is obtained from other sources. The most recent four to 18 months of the CES series rely on the CES survey, which covers about one-third of the nation's nonfarm employers, the Dallas Fed said in its December Energy Indicators report.

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The Bureau of Labor Statistics reported that Texas gained 5,600 oil and gas extraction jobs year over year, but the Dallas Fed revised that number down to 2,200. The support activities sector, which is mostly oilfield services, lost 9,200 jobs in the period, according to Dallas Fed data, an improvement over the loss of 11,600 jobs indicated by Bureau of Labor Statistics data.

The "other" mining category was revised from a gain of 1,900 jobs to a loss of 1,200.

Regional drilling fell at an annual rate of 30% through November while support activities, mostly oilfield services jobs, followed the U.S. rig count lower and declined an annualized 6.7% through October.

Oil and gas extraction jobs, done mostly by exploration and production companies, were nearly flat in the first half but picked up leading to the end of the review period.

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Bankruptcy data also reflects a more difficult slog for the oilfield services sector as bankruptcies picked up considerably in the second half, the Dallas Fed said.

According to data from law firm Haynes and Boone LLP, 11 oilfield services companies filed for bankruptcy in the third quarter, compared to four in the first half of the year and 12 for all of 2018. In the exploration and production space, bankruptcy filings totaled 15 in the third quarter, compared to 18 in the first half of the year and 28 throughout 2018.

Weak crude oil prices have impacted returns across the entire value chain. Still, oilfield services companies seem to have suffered the most since the 2014 downturn in prices, Deloitte said in a December report.

"Their revenues and earnings are down almost across the board as most upstream companies, reacting to investor skepticism and negative market sentiment, are cutting their cost structure, with the goal of decoupling their costs from the movement of hydrocarbon prices," analysts with the accounting and consulting firm said.

Deloitte said that while facing significant challenges, oilfield services companies have a chance to build a financial structure that enables profitable growth.

The firm analyzed data of 70 oilfield services companies worldwide and found that among them, average margins fell from 15% to less than 5% between 2014 and 2019. If these 70 companies could increase margins to 2014 levels, they would collectively earn an additional $20 billion each year and potentially more than $30 billion per year across the entire oilfield services industry, Deloitte said.

However, this would be a "big challenge," the report said.