IN THE NEWS / Oilpatch Jobs Under Fire
Low prices affect energy firms
CALGARY SUN
Mergers and acquisitions in the Canadian oilpatch will continue their torrential pace over the next few months.
And that's bad news for workers both in the field and downtown Calgary, predicts top oil analyst Wilf Goberg.
"Consolidation always means fewer jobs in the field and that means less office requirements," Goberg told delegates of the First Annual Alberta Real Estate Forum in Calgary yesterday.
Holding the industry hostage are low oil prices, which edged upward in September but show few signs of returning to levels enjoyed last year.
Low oil prices have taken a chunk out of stock prices of energy companies, forcing them to borrow more to finance spending on things like exploration and development drilling programs, said Goberg.
And when debt levels rise -- coupled with falling cash flow falls and weak stock prices -- weaker companies become ripe for the picking, said Goberg.
"The industry is suddenly putting on the brakes long after they should have and now they will have to hit the brakes harder," said Goberg, managing director of research at Peters and Co.
There have been several oil price downturns over the past three decades, but they all began because oil companies produced too much. This current downturn marks the first time over-supply was matched by falling demand due mainly to sputtering economies in Asia, added Goberg.
But now economists are turning their attention to another dark cloud on the financial horizon -- Latin America.
Jeff Rubin, chief economist at CIBC Wood Gundy, said the next to fall to the economic malaise gripping Asia will be Brazil, Chile and Argentina.
As Asia slowly coughs its economy back to better health, Latin America is racing toward recession "and in that race, Latin America will win hands down," Rubin told delegates.
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