Three times on the same day, in conversations with three different people in three different towns, this phrase came up: “This downturn is like the 80s.”
And that, my friends, is really not a good thing.
Over the years numerous people I’ve interviewed had told me the story of their lives and their businesses. And the ones who have been in business the longest invariably reflect on the hard times, the times they just squeaked through or nearly lost their business. While 2009 was tough in other areas, it wasn’t that bad in southeast Saskatchewan. One person called it “a bit of a road bump.”
In contrast, 1998 was worse. And 1986 was much, much worse.
More and more I have been hearing that this current downturn is shaping up like that, from what I understand. I was 11 in 1986, but I’ll take the word of those who are much wiser than me.
Even the National Post ran a headline on Aug. 5 saying “With crude at US$50, oil firms fear deeper crisis than in 1980s.”
It’s not just the depth of this downturn, but the length, with no end in sight.
On August 11, the Daily Oil Bulletin reported West Texas Intermediate cash price at $44.83 a barrel, while the September 2015 contract price was $44.96. A year ago on the same date that price was $97.65.
Saskatchewan had 37 drilling rigs working, two of which were drilling for potash. Crescent Point had 12 rigs working down from 23 it had for most of the winter and summer drilling season 2015 until mid-July. Several people I spoke to expressed concern that number could drop much lower. (A week later, there were 31 rigs working.
On Aug. 9, 2014, there were 74 rigs working in Saskatchewan. On the same date in 2013 it was 75. So 37 or 38 is a huge drop. And unlike the peaks and valleys seen in recent years during the summer, this year has been flat. The one bright spot is that some of the juniors have picked up their drilling as Crescent Point shed rigs. Triland, Torc, Silver Bay, Spartan, NAL and Villanova 4 were drilling. The Viking play also had 10 rigs going. But these numbers are nowhere near what we’re used to.
I spent Aug. 10 driving around Alida, Alameda, Carnduff and Oxbow. What did I see? A lot of iron, just like I saw in Weyburn the week prior.
Yards are full of trucks, generators, service rigs, excavators, dozers, pickups. I have never seen so much iron parked in the middle of summer in all my time reporting for this paper. There were rigs racked everywhere.
It is a sad sight to see all that equipment lined up in what has probably been the best weather we’ve had for summer activity in years. While some areas have had a bit of rain, the constant lament of “it’s too wet” I’ve heard ever since 2011 is certainly gone. My grass in Estevan is so dry and brown you would think it was a sepia toned photograph. Yards are full of stacks of mats because there’s no need for them.
Another phrase I’ve heard from numerous people is “It’s getting ugly out there.”
We saw a round of layoffs eight to six months ago. That was mostly junior, less experienced staff. I’m afraid we’re soon going to see another round, and this time it’s going to be the 20-year men let go.
Companies that have been holding on as much as they can may find they can’t any longer. Trust me, there will be auction sales coming. One person told me the Dayman family of Estevan selling their iron early this year was a stroke of genius, getting out while prices were still good. I highly doubt anyone taking a truck to Ritchie Bros. this fall will do well.
It’s getting ugly, all right.
Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net.
