01/22/2015 03:46 EST | Updated 01/23/2015 10:59 EST

Canadian Drilling Slowdown Threatens 23,000 Jobs; 'Companies Are Going To Die'

Some 23,000 jobs related to Canada’s oil drilling industry could potentially disappear this year thanks to the oil price collapse, an industry group says.

The Canadian Association of Oilwell Drilling Contractors (CAODC) expects the number of active drilling rigs in service to drop by 41 per cent this year, as oil companies cut back on investment in new operations.

As recently as November, the group had forecast an average of 338 active drilling rigs this year.

“The new reality of $55 oil means that the entire industry will hurt for a period, and drillers and service rig contractors are not immune to that,” CAODC President Mark Scholz said in a statement.

The pain for drillers has already begun. Houston-based oilfield services companies Baker Hughes and Schlumberger have announced 16,000 layoffs between them in just the past few weeks, some of those in Canada. Halliburton laid off 1,000 people in December and hinted at further layoffs.

CAODC sees 3,400 Canadian drilling jobs disappearing this year, taking with them another 19,000 indirectly related jobs.

The drilling slowdown “will have significant adverse effects on indirect employment throughout the economy, well beyond just rig workers,” Scholz said.

The effects of lower oil prices are already impacting Canada's economy. Calgary’s housing market has taken a very rapid turn for the worse, and recent projections indicate lower oil prices will translate into nearly $14 billion in lost revenue for the federal government and provinces.

John T. Young, head of restructuring firm Conway Mackenzie, issued a dire warning about the industry Thursday. Drilling contractors are being squeezed by a "double whammy," he said: Struggling oil companies want major reductions to prices, while at the same time delaying their payments to oilfield services firms.

The second quarter is going to be devastating for the service companies,” Young told Bloomberg. “There are certainly companies that are going to die.”

CAODC’s Schulz takes a more positive approach than Young, noting — like many others — that oil has long been a boom-and-bust business, and has always rebounded.

“We have been through rough patches before and come out strong on the other end, and I’m confident that we will do that again, but right now, that’s going to involve buckling in,” he said.

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