Slowdown in oilpatch activity hurting work camp operators

CALGARY - A slowdown in oilpatch activity means fewer tradespeople on site, putting a squeeze on businesses that house and feed workers in remote locations.

See Full Article

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."



Advertisements

Latest Economic News

  • Crude dips as Trump says he will not accept high oil prices

    Economic CBC News
    U.S. President Donald Trump criticized OPEC on Friday for output curbs that have helped raise global oil prices and said "artificially" high prices would not be accepted, drawing rebukes from oil-producing countries as prices dipped following his remarks. Source
  • Wells Fargo to pay US$1B for mortgage, auto lending abuses

    Economic CTV News
    NEW YORK -- Wells Fargo will pay US$1 billion to federal regulators to settle charges tied to its mortgage and auto lending business, the latest chapter in a wide-ranging scandal at the banking giant. However, it appears that none of the US$1 billion will go directly the victims of Wells Fargo's abuses. Source
  • Lagarde urges countries to settle trade disputes, cut debt

    Economic CTV News
    WASHINGTON -- The head of the International Monetary Fund is urging countries to work out their differences over trade and take advantage of a healthy world economy to reduce debt before the next downturn comes. Source
  • Kushner Cos. subpoenaed by feds after AP report

    Economic CTV News
    NEW YORK -- The Kushner Cos. has been subpoenaed by federal prosecutors for information related to an Associated Press report that the company filed dozens of false documents about its buildings in New York City. Source
  • Pipelines, politics and petrodollars: Here's why Canadian gas prices are spiking

    Economic CBC News
    The price of filling up a tank of gas is a classic Canadian irritation. But a confluence of factors may soon make that process even more gob-smacking than usual. Here's a look at five reasons gas prices are soaring. Source
  • Air Canada, WestJet offer cheap basic economy fares for no-frills seekers

    Economic CBC News
    Thought economy was the lowest class on a plane? Think again: Air Canada and WestJet are selling "basic economy" fares that cost less and offer even fewer features, such as no options to change your flight. Source
  • Asian stocks fall over trade concerns

    Economic CTV News
    SEOUL, Korea, Republic Of - Asian shares fell back Friday after a major supplier to Apple forecast continued weak demand for mobile devices. A warning by the head of the IMF over the potential for trade tensions to harm global growth also weighed on sentiment. Source
  • Global shares fall back on trade worries, tech outlook

    Economic CTV News
    SEOUL, Korea, Republic Of -- Global shares fell back Friday on worries over trade tensions and tech outlook after a major supplier to Apple forecast continued weak demand for mobile devices. A warning by the head of the IMF over the potential for trade tensions to harm global growth also weighed on sentiment. Source
  • Canadian Pacific starting operations shutdown ahead of possible strike

    Economic CTV News
    CALGARY -- Canadian Pacific Railway says it has begun shutting down train operations ahead of a possible strike set to start Saturday by two unionized workforces. The company says it has an embargo application in place on shipments going to or from CP's Canadian locations that will take effect just after midnight on April 21. Source
  • DavidsTea swings to loss on charges but says e-commerce improving

    Economic CTV News
    MONTREAL - DavidsTea Inc. says it swung to a loss in its last quarter as onerous contract charges and impairments weighed on its balance sheet. The specialty tea retailer says it had a loss of $16.1 million for the fourth quarter ending Feb. Source