Hit by a slump in natural gas and oil prices, Southwestern Energy Co., the leading operator in the Fayetteville Shale, eliminated 80 positions in Arkansas on Thursday, the company said.
The job cuts in Arkansas were at the company’s offices in Damascus, Conway, Judsonia and Cleveland. Another 22 jobs at Southwestern Energy’s headquarters in Houston also were cut.
Energy companies are digging deeper to cut costs during a period of persistently low natural-gas and oil prices. The companies have been idling rigs and making other spending cuts in response to market supply and prices, energy analysts said.
“The whole industry is paring back,” said Andrew Coleman, an analyst with Raymond James & Associates. “Southwestern and all companies are going to allocate their capital where they think they have the best returns.”
Southwestern Energy employees were told about the layoffs, which started Thursday, in a Monday afternoon call with Chief Executive Officer Steve Mueller, said spokesman Christina Fowler.
“A reduction in operations and shifting capital budgets across Southwestern Energy related to commodity prices, unavoidably led to a lower number of employees being required in certain areas,” the company said in an emailed statement.
“Southwestern comprehensively evaluated various scenarios and carefully considered the impact to our employees,” the statement said. “In many cases, employees were given the opportunity to transfer to other locations or positions. Nonetheless, positions were not available at this time for all our current employees.”
Fowler said she could not disclose what jobs have been eliminated nor how many employees the company has in the state. She said that the number of jobs eliminated represents about 4 percent of Southwestern Energy’s total employment numbers.
The layoffs won’t affect state incentives provided to Southwestern Energy, said Scott Hardin, spokesman for the Arkansas Economic Development Commission.
In 2008, the company received a tax-back incentive, which provides sales-tax refunds on building materials and equipment for the construction of Southwestern Energy’s regional headquarters in Conway.
The other incentive, Advantage Arkansas, provided an income-tax credit for job creation for five years. It has expired, Hardin said in an email.
Low natural-gas prices in particular have beset producers in the Fayetteville Shale in north-central Arkansas where drilling activities have been scaled back.
Drilling has slowed in the past three years as companies shifted focus to other shale formations — such as the Eagle Ford in Texas and Marcellus in the Northeast. Those shale areas are producing oil and natural gas liquids, such as ethane and butane, and are more profitable than the dry gas found in the Fayetteville Shale.
Phil Flynn, an energy analyst with Price Futures Group, said that even with the drop in crude prices over the past 12 months, oil and other liquid products remain more valuable than dry natural gas.
When exploration and drilling of the formation peaked in 2008, there were 60 rigs in Arkansas.
Now, Southwestern Energy, with four rigs, remains the only company actively drilling in the area. Two other producers, BHP Billiton Ltd. and XTO Energy Inc., a subsidiary of Exxon Mobil Corp., have no rigs in the Fayetteville Shale.
BHP Billiton last year briefly placed its Fayetteville Shale assets for sale before taking them off the market. A spokesman for XTO Energy said in an email that the company is continuing with well completion, remedial work and other activities in the shale.
“XTO takes a long-term approach to the business and we manage normal fluctuations in the oil and gas industry cycles to economically develop our acreage,” said Suann Guthrie in the email. “The Fayetteville continues to be an important area for XTO within our Mid-Continent Division’s operations.”
In February, Southwestern Energy announced plans to cut spending in Arkansas by 40 percent this year.
The move, which was part of the company’s overall capital investment reduction, matched reductions made by other energy firms.
Like other companies, Southwestern Energy lowered its 2015 capital spending plans last week when it announced its second quarter financial results.
Southwestern Energy plans to spend just under $1.9 billion, down from the $2 billion it forecast in February.
The amount of spending planned in the Fayetteville Shale remains unchanged at $560 million.
The company plans to spend more on its operations in the Utica and Marcellus Shales in the nation’s Northeast.
Southwestern’s spending estimate for that region has been lowered from $1.2 billion to $1.1 billion.
“The drop in oil prices … [is] getting people to retrench a little bit,” Flynn said. “Any movement is probably a defensive move against these prices.”