Oil and gas downturn: Worse than 2009? For some, yes

This morning I chatted with a manager at a metal fabricator in Houston who, to put it bluntly, has not been having a very good year and a half.

Any fabricator with deep ties to oil and gas can probably relate. The shop manager told me about how his operation was riding high on a $1 million order for sheet metal enclosures for oil drilling rigs. That was in 2014. In 2015, that order halted, suddenly and completely.

At the beginning of last year, the manager thought the downturn would last for a few months, maybe half a year, but it wouldn’t linger. And in some respects, it didn’t. The fab shop’s oil and gas work hasn’t dried up completely. Companies still need to maintain their existing oil fields, after all, and that requires at least some metal fabricated components.

But he conceded that he didn’t expect the downturn to be as long and as severe as it has proved to be. He added that for his shop, at least, it’s actually worse than the Great Recession of 2009 and 2010. After all, the oil and gas sector wasn’t a bad place to be during the financial crisis.

The shop’s oil and gas customers now serve just a handful of global players. They have consolidated to the point where his small Houston shop was producing parts for components that ended up being sold the world over. This was great for business during the oil and gas boom, but now, not so much. Today, even the smallest shops have global reach, and with that comes greater opportunity and greater risk.

The oil and gas industry was extraordinarily big business for many fabricators at the height of the boom in 2013 and 2014. That’s not the case anymore. Of course, the Houston shop has been through economic corrections before, and is diversifying its customer base to make it through the tough times. Thankfully, the oil and gas sector isn’t the only game in town.