Slowdown in oilpatch activity hurting work camp operators
Three pumpjacks are shown on the Alberta Bakken oil field near Warner, Alta., on Aug. 3, 2014. (Larry MacDougal / THE CANADIAN PRESS)
Lauren Krugel, The Canadian Press
Published Monday, March 7, 2016 4:43AM EST
Last Updated Monday, March 7, 2016 5:34AM EST
CALGARY - A slowdown in oilpatch activity means fewer tradespeople on site, putting a squeeze on businesses that house and feed workers in remote locations.
Before the downturn, when the oil and gas sector was chugging along, it was a challenge to entice enough skilled labourers to work for weeks on end far from home. Fat paycheques were one draw, but quality lodging was also key.
Many camps more closely resemble hotels or resorts, complete with Wi-Fi, fitness centres, ice rinks and meals prepared by Red Seal chefs.
They're quieter places nowadays, with oil and natural gas prices too weak to justify most new projects.
Black Diamond Group CEO Trevor Haynes figures the company's lodges are at about half occupancy these days. A few years ago, when times were better, it was more like 80 per cent.
The workers who remain are settling in for longer stays, as frequent shift turnovers eat into productivity at the mine or drill site, Haynes said.
Black Diamond is responding by tackling costs. Administrative expenses were down by 23 per cent during the last three months of 2015 compared to the fourth quarter of 2014, while capital expenditures were 97 per cent lower.
One of the more "painful" measures has been to reduce the workforce last year by around 130 to 140.
"It's really hard to turn an organization around from being fast-growth to being very cost-conscious," he said. "It was a very difficult year in that respect."
It's a similar story for another big camp operator, Horizon North Logistics.
CEO Rod Graham told a recent conference call that he'd like to say the pain is over, "but I know that would be a falsehood."
"Horizon North's traditional energy markets in Western Canada are under extreme duress."
As of mid-February, Horizon North had a workforce of just under 1,200 - down 700 from the same time a year earlier, said Graham.
Jim Seethram, chief operating officer at Orissa Software, said the earliest signs of distress in the resource sector can be witnessed at work camps.
Orissa's system helps companies manage the comings and goings of their workers, processing more guest stays than some of the world's biggest hotel chains.
The decline has been most dramatic in open camps - ones that house workers for quick drilling jobs, as opposed to ones owned by oilsands operators, for instance.
Some regions have felt more pain than others. Shale oil rigs in North Dakota, for instance, "dried up in an instant" as it only takes a few days to wind down one of those operations, said Seethram.
But in the oilsands, the sunk costs are considerable and it takes years to build a project that will operate for decades. Operators are loath to stop construction partway through.
When activity does eventually pick up again, Seethram said he's not expecting to see camp operators pull back much on the bells and whistles for new projects.
"I don't think we can go backward from that," he said. "I think the camp operators have recognized that's what their guests are demanding and that's what draws them to the work site and that's just a necessary cost of business."