Almost 1,000 energy-sectors jobs are disappearing, mostly in Calgary, as two major oil and gas players announced plans today to scale back operations because of the low price of crude.
ConocoPhillips Canada confirmed to CBC News it will reduce its workforce by about 15 per cent — 400 employees and 100 contractors.
"We informed people yesterday [Monday], but the vast majority of the actual reductions will occur by mid- October. The majority of the reductions in Canada will be in our Calgary office," said its communications director, Rob Evans.
Penn West Petroleum Ltd. also announced a major reduction in its workforce. About 400 full-time employees and contractors — most of them working at company headquarters in Calgary – are being let go.
Most of the job cuts are effective immediately and the rest will be complete by the end of this year, the company said Tuesday.
The jobs represent 35 per cent of the total workforce at Penn West, a prominent mid-sized oil and gas producer.
Chris Dumanowski, 48, laid off from his position as a field operations manager, found some comfort in the news: He'll have more time for home-improvement projects.
"It's a little bit depressing for sure," he said. "It's a pretty tough market in the oil and gas industry right now. It'll definitely be a tough go."
The workforce reduction is part of Penn West's response to a recent decline in oil prices. It's also suspending dividend payments to its shareholders after its next payment in October and reducing compensation for its board of directors.
It has also identified a further $75 million of capital spending that will be put off, reducing this year's capital budget to $500 million — a 40 per cent reduction from its original plan to spend $840 million in 2015.
There have been significant job losses in the last two years at Penn West, with the workforce dropping from 2,350 employees in June 2013 to fewer than 1,000. The company has also faced legal challenges from investors after accounting irregularities were discovered last year.
In March ConocoPhillips announced it was cutting seven per cent of its Canadian staff — about 200 jobs.
University of Calgary energy economist Michal Moore says he expects there will be more oilpatch layoffs this fall.
"The long term picture is — at least over the next 18 months or so — is pretty bleak. And the companies are hunkering down trying to make sure they can survive that period," he said.
New focus for Penn West
For next year, Penn West will aim to keep its capital spending within cash flow generated from operations, with a focus on its light oil properties in the Viking and Cardium shale formations in Western Canada.
The company has scheduled a morning conference to brief analysts, starting at 8 a.m. MT.
"We have made a number of exceptionally difficult decisions in order to remain competitive in the current commodity price environment," Penn West chief executive and president Dave Roberts said in a statement,
"We view the cost reductions as sustainable and we will remain well positioned for the potential expansion of development activities and capital programs in the future."
Penn West estimates that the workforce reduction will reduce spending about $45 million a year. The suspension of its dividend after the previously announced payment of one cent per share on Oct. 15 will reduce annual cash outlays by $20 million.
Payments to non-management directors on Penn West's board will be cut 40 per cent and the payment to Penn West chairman Rick George will be cut by 50 per cent.