Bakersfield-based Aera Energy LLC became the latest local oil producer to scale back operations, saying Friday it has begun informing contractors of an immediate halt to oil field projects that no longer make economic sense with barrel prices at an 18-year low.
"Several hundred" people working for Aera contractors in Fresno, Kern, Monterey and Ventura counties will likely be laid off immediately, Aera spokeswoman Cindy Pollard said, adding that companies were first informed of the cutbacks late this week.
No one working directly for Aera will be let go, Pollard emphasized. The company is trying to keep all its employees working full regular schedules, she explained, in preparation for a time when prices justify more activity and investment.
She declined to say what portion of the company's oil production operations and drilling projects are being shut down.
"Some (activities) will be economic, some won't be," she said.
"We are continuing to produce but we are reducing our discretionary activities that don't make economic sense in this price environment."
Aera's statement reflects the pain spreading across local oil fields as companies deal with fallout from declining demand during the pandemic and rising supply related to a battle for market share between Russia and Saudi Arabia.
Smaller local oil producers have said they have already laid off workers and canceled projects, while others have reacted by trimming employees' work hours.
On Friday, Midway-Sunset — the local crude Pollard said Aera watches most closely — was selling for $25.37 per barrel, a 20 percent jump from the day before but still only about half its price a month ago.
In an ironic coincidence, state regulators announced Friday they have approved a first bundle of 24 west Kern well-stimulation projects — all of them belonging to Aera — following a Newsom administration push to put such applications through close scrutiny by Northern California scientists.
The newly renamed California Geologic Energy Management Division said the reviews have held up permits for such jobs, including hydraulic fracturing, since June 2019.
CalGEM, in announcing the milestone in Gov. Gavin Newsom's efforts to ensure oil field safety and regulatory compliance, said Friday that 282 well-stimulation project applications remain under review by Lawrence Livermore National Laboratory in the Bay Area.
Aera welcomed the approvals, saying they allow the company "to continue to safely and responsibly produce the energy that the working men and women of California count on every day."
There was no word on how many of the well-stimulation permits the company deems economical under current market conditions. But Pollard said Aera will use these permits on production wells.
"And, we are looking forward to getting more permits so that when the price of oil rebounds we’ll be well positioned to ramp up to our full scale of production," she added in an email.
As the company weighs which projects to close, Pollard said, it is considering shutting off some oil field activities that require a minimum level of steam injections to remain on standby without need for a sizable investment to reactivate them later.
"Right now all options are on the table," she said, "and where it makes sense for us to (cut off steam) and still maintain the integrity of the field, that's still an option.”