Struggling against long-term, dire industry trends this year, oil and gas companies have made sure to protect two things: Executive pay and dividends for their shareholders.
Despite the assurances of their boosters in Congress, fossil fuel companies have done little to protect jobs: laying off workers by the thousands and forcing their investors to write off billions in bankruptcy court — all while benefiting from the Trump Oil Bailout’s bond purchases and taxpayer-backed loans, a BailoutWatch analysis of their public disclosures has found.
Diamond Offshore Drilling presents a clear example: Soon after receiving a $9.7 million tax bailout last spring, part of the CARES Act stimulus, the company filed for bankruptcy protection. A few weeks later, Diamond Offshore sought and received permission to pay the same amount, roughly $9.7 million, in executive bonuses. And this month, Diamond Offshore disclosed it has laid off nearly a quarter of its workforce.
Seadrill Limited and Superior Energy Services are some of the other companies that laid off workers and sought bankruptcy protection while protecting executive pay.
Throughout 2020, fossil fuel champions, from Sen. Ted Cruz and Sen. Joe Manchin to the Independent Petroleum Association of America, defended the Trump Administration’s multi-billion dollar campaign to prop up the oil and gas industry by arguing that the bailout would secure worker jobs.
Responding to a Wall Street Journal investigation citing BailoutWatch findings in December, Cruz tweeted that he had lobbied in defense of “the ENTIRE oil & gas industry” because “I’m proud to defend jobs in Texas.” Despite the bailouts, however, energy sector employment declined for the seventh straight quarter at the end of last year, according to the Dallas Fed’s energy survey. Wages and hours worked also continued to decline.
The layoffs at Diamond Offshore and others like it highlight the duplicity underlying politicians’ defense of fossil fuel bailouts in the name of protecting workers — more so given that those receiving bailouts are the politicians’ key campaign contributors. The trend of fossil fuel companies accepting CARES Act bailouts while their employees and investors suffer underscores the programs’ failure to ensure companies used the money to keep workers on the payroll.
Other companies in a similar situation include:
- Seadrill Limited, a London-based offshore driller with a web of subsidiaries and affiliates, disclosed a $3 million tax bailout in June, a few months after announcing a plan to lay off 1,400 workers over the next 18 months. Seadrill Partners, an affiliate that holds the rigs it operates, filed for bankruptcy protection in December — two months after layoffs hit 168 Houston-area workers at its U.S. operating affiliate, Seadrill Americas. (Seadrill Limited, the English company that received a tax giveback from the U.S. government, itself filed for bankruptcy protection in 2017 and emerged a year later.)
- Superior Energy Services Inc. said in May it had cut $115 million from payrolls through layoffs, salary cuts and furloughs. In July, it received a $30.5 million tax bailout. In September, the company’s board agreed to pay $7.3 million to six top executives; and in December, it filed for bankruptcy protection. Less than two months later, Superior emerged, having forced bond investors to write off $1.3 billion of debt and zeroed out shareholders’ stakes.
Companies seek bankruptcy protection when they can’t meet their financial obligations. Under court oversight, bankrupt firms can force investors to cancel some debts and, in theory, emerge stronger and more stable. Hundreds of oil and gas companies flooded into bankruptcy courts in the years before the pandemic as low oil prices and increasingly competitive clean energy left them unable to repay their debts.
When oil prices slumped last year, bankruptcy dockets grew to include companies like Diamond Offshore and Superior that benefited from tax refunds extended under the guise of pandemic relief.
Shale gas pioneer Chesapeake Energy cut 13% of its workforce in April, announced in May that it would prepay $25 million in bonuses to 21 top executives, and filed for court protection in June. Chesapeake cut another 15% of its staff before exiting bankruptcy this year. To make that exit, the company relied on a different bailout benefit: The indirect support of the Federal Reserve, whose bond-buying programs helped troubled companies borrow more easily. Chesapeake was able to issue $1 billion in new debt to emerge from bankruptcy this month.
Fossil fuels received outsized shares of some bailout programs despite their financial weakness and the harm they cause. Although some major oil companies, like Shell and BP, say they are shifting their emphasis to clean energy, U.S. oil companies including Exxon and Chevron want to remain focused on fossil fuels for the foreseeable future.
Meanwhile, natural gas producer CNX, formerly part of Consol Energy, said it “expects natural gas to continue to be a significant contributor to the domestic electric generation mix in the long term, as well as to fuel industrial growth in the U.S. economy” in its annual filing this month.