Canadian natural gas giant Encana says it will cut its workforce by 20 per cent and close its office in Plano, Texas.
At the end of the last fiscal year, Encana had 4,169 employees, so a 20 per cent reduction would work out to just over 800 people.
The Calgary-based company also plans to narrow its production focus to five oil-related projects in North America from as many as 30.
"In order to align our organization with our strategy, we have had to make a number of exceptionally difficult decisions," chief executive Doug Suttles said in a statement.
"The restructuring that is underway reflects our shift from funding about 30 different plays to focusing our resources on five key areas.
Encana said it plans to sell assets and improve its cash flow. It will also create a separate company to own its mineral rights and royalty interests across southern Alberta, the statement said.
An initial public offering will be done by mid-2014.
"Encana intends to retain a significant stake in the new company, which will manage leasing activities in the area currently known as Encana's Clearwater play," the statement said.
Suttles was upbeat about the company's future after the restructuring and layoffs.
"I'm excited about Encana's future and encouraged by how our people have rallied as one team to get Encana back to winning," he said in the statement.
"While we have a lot of challenging work ahead of us, I am more confident than ever that we will be successful."
Concern in Calgary
Thousands of workers heading Tuesday morning into The Bow, the downtown Calgary skyscraper that serves as headquarters for Encana and Cenovus Energy, told CBC News they are facing uncertainty. About 400 of the company's staff are in Texas, but that still leaves hundreds of jobs on the line in Denver, Co., and Calgary. Layoff notices are expected by the end of the year.
"I have no idea what I'm walking into," said one worker.
Another woman said she knew restructuring was on the horizon and she'd already started peeking into other jobs, but she has faith in the company's upper managers. "I think the direction they are going is necessary for the growth of the company," she said.
Deborah Yedlin, a business columnist in Calgary, said the company is going back on its initial goal in the merger between PanCanadian and Alberta Energy Corporation of creating a big company that couldn’t be taken over.
“When you look at it from that standpoint, this is going to be a smaller company. It is going to be easier for somebody else to swallow. Because it’s natural gas, it probably won’t trigger the same consternation in Ottawa.”
In Calgary there is an "undercurrent of concern" for natural gas producers facing low gas prices, Yedlin said.
“In Talisman [Energy's] case, they also have the same situation in terms of having to re-focus their capital expenditures into where they can make the best return. So they are in that same position. I think there are natural gas producers on the smaller end that are also having challenges in Calgary… so everybody is watching their costs very carefully," she said.
“But then again there are some companies that are doing extremely well, like Tourmaline, so it just depends on how you’ve managed your asset base and your capital structure, etcetera.”
Key projects includes 2 in Alberta
Encana will invest approximately 75 percent of its 2014 capital into five high return projects in North America: Montney and Duvernay projects in Alberta, San Juan Basin in New Mexico, Louisiana's Tuscaloosa Marine Shale, and DJ Basin (a deposit of oil and natural gas located in northeast Colorado and extending into Wyoming and Nebraska).
The cuts will not have an immediate impact on the company's multimillion-dollar natural gas field off the coast of Nova Scotia, Deep Panuke.
Suttles said the company sells that gas at a premium and the field is not yet at full production. However, he said he would not rule out selling the field in the future.
The company also slashed its dividend significantly, cutting it by more than two thirds to seven cents per share. That's down from 20 cents.
Encana shares were up about four per cent to just over $19 on the TSX on Tuesday. But the shares are still down by more than 15 per cent in the past 12 months.