Whether due to OPEC’s stubbornness, blown oil demand forecasts or exploration and production (E&P) companies’ relentless drive to increase production, tough times are getting tougher.

Baker Hughes Inc. (NYSE: BHI) is the latest large-cap service company to cut employees because of a slump in activity. E&Ps are also eliminating positions and at least one driller has filed for bankruptcy. Even suppliers, such as sand companies, are starting to feel the squeeze as frack demands lessen.

BHI said it plans to eliminate 7,000 positions, which the company has already identified.

Along with BHI, services giant Halliburton Co. (NYSE: HAL) announced in December it would cut 1,000 jobs, and on Jan. 15 Schlumberger Ltd. (NYSE: SLB) said it would lose 9,000 positions globally.

The $35 billion BHI/HAL proposed merger is telling, said Raoul Nowitz, managing director of SOLIC Capital.

“You have these two industry titans competing head-to-head now, realizing they would be better off surviving together than being separate,” he said.

To make budgets work, dozens of E&Ps cut capex toward the end of 2014, with others just beginning to make announcements.

E&Ps have mostly cut capex, but a few have also announced layoffs. On Jan. 20, Laredo Petroleum Inc. (NYSE: LPI) said in a Securities and Exchange Commission filing that it is initiating a company-wide reorganization that includes an immediate reduction of about 75 employees.

LPI estimated it will incur a one-time $7.4 million charge in the first quarter of 2015 for compensation, tax and various expenses.

“The company’s board of directors approved the plan following the recent drop in crude oil and natural gas prices in an effort to reduce costs and better position the company for future efficient growth,” the filing said.

In December, the company set its budget at $525 million, about 48% less than the $1 billion it spent in 2014.

The company has hedges in place for 2015 for more than 95% of anticipated oil production at a weighted average floor price of $80.99 per barrel.

For companies with depleting assets, such cuts aren’t necessarily a help long-term, said Nowitz, who provides restructuring services to middle market companies.

“It risks shrinking their borrowing base and decreasing liquidity,” he said.

Antero Resources Corp. (NYSE: AR) said Jan. 20 that 2015 capex would fall to $1.8 billion, down 41% from 2014’s $3.7 billion budget. The company plans to operate 14 drilling rigs across the Marcellus and Utica shale plays in 2015, down from 21 at year-end 2014.

“Previously announced hedges of 1.8 trillion cubic feet equivalent of production spanning six years will greatly enhance Antero's ability to stay competitive in the increasingly weak commodity price environment,” said J. Marshall Adkins, analyst, Raymond James.

The company will still generate production growth of 40% despite its 2015 drilling and completions budget falling by one-third, said Paul Rady, Antero’s chairman and CEO. "Despite the challenging commodity price environment, Antero is well positioned to continue executing on our development program and achieve peer-leading growth and margins.”

Apache Corp. (NYSE: APA) said Jan. 15 it would cut about 5%, or less than 200, of its total global workforce of 5,000.

Projects Put On Hold

Nowitz said labor reductions and capex are the major areas the industry is focusing on, with one early estimate that $150 billion worth of oil and gas exploration projects could be put on hold in 2015.

At a high level, the industry will see winners and losers, with bigger players better positioned for the sudden downturn. Prudent companies that have borrowed less and have good liquidity will likely be the survivors.

Smaller, midsize companies─particularly independents that borrowed and were light on hedging─might fall.

“They may be finding the road ahead more challenging,” Nowitz said.

Bankruptcy For Some

At least one drilling company, WBH Energy GP of Austin, has filed for Chapter 11 bankruptcy to allow it to reorganize.

WBH declared no assets and $29.5 million in liabilities on a Jan. 20 court filing in the Western District of Texas. The company lists backer CL III Funding Holding Company LLC as its creditor.

Nowitz said that when gas prices plummeted several years ago, many stressed companies filed for bankruptcy.

He said he assisted a mix of companies during the gas price decline that generally fell into three categories.

For some, “there was no way out. They had to clean the balance sheet and the only way they could do it was through a bankruptcy process.”

Other enterprises were able to remedy their situation in court by biding their time and making operational fixes and gaining access to fresh capital.

“There were some other parties that weathered it quite well, they were better capitalized and had liquidity,” he said. “You saw parties in all three of those situations.”

Granular View

Supply companies are also on the rocks.

James Crandell, managing director, Cowen and Co., said his demand model projects an 18% decline in frack sand consumption in 2015.

“We see utilization falling to below 50% and mine gate spot pricing falling by over 20% by the end of 2016,” he said.

The updated estimates assume take-or-pay contracts are honored while other contracts are at risk of lower volumes and price.

“If spot prices decline more significantly than our 20% assumption, we believe take-or-pay contracts could be vulnerable to renegotiation,” Crandell said. “While the upcoming slack in the industry should drive consensus estimates lower, we believe the stocks are already largely reflecting this headwind and see attractive risk-reward in the group.”