Energy sector layoffs pile up as companies say efforts to cut costs paying off

Canada's oilpatch continues to move aggressively to cut costs with companies like Cenovus saying their efforts are starting to show results.

Cenovus, Suncor, Athabasca Oil and Calfrac among latest to significantly downsize

Most industry insiders believe there will be no near-term recovery in oil prices. (Matthew Brown/Associated Press)

Canada's oilpatch continues to move aggressively to cut costs and companies say the efforts are starting to show results.

Cenovus Energy said Thursday that it had increased the number of people laid off in the second half of the year to 700, roughly double what it forecast in July, after cutting 800 jobs in February.

The company said it expects to end the year with 24 per cent fewer staff than it started with and there are plans for more cuts next year as it makes structural changes.

"We're fundamentally changing the way we work," Cenovus chief executive Brian Ferguson said in an interview.

Cenovus CEO leaving 'no stone unturned' to cut costs

The company is also cutting benefits like giving employees the first and third Friday of the month off, and is looking at all aspects of discretionary spending as it works to drive down costs.

"We're continuing to focus on where and how we improve our cost structure," said Ferguson. "We're leaving no stone unturned."

So far the efforts are paying off, with expected savings of $400 million this year rather than the $240 million Cenovus had forecast earlier. It anticipates further savings of $100 million next year as a result of this year's staff cuts.

Cenovus says its efforts led to a 23 per cent drop in per-unit operating costs in the third quarter at its oilsands projects compared with a year ago.

Ferguson said the company has to keep driving on costs as there is no clear near-term recovery in oil prices.

"There's more uncertainty in the macro environment today than there has been," said Ferguson. "I think you could see the macro environment continue to deteriorate for the next couple of quarters."

Athabasca Oil and Calfrac

Athabasca Oil Corp. said Thursday that in response to the challenging times it had reduced its office and field staff by about 25 per cent this week, without disclosing the number of jobs actually cut.

"Unfortunately, these are the necessary steps required to weather an extended downturn," company spokesman Matt Taylor said in an email.

Fracking company Calfrac Well Services has also significantly reduced staff in the face of continued low oil prices, saying Thursday that head counts have been cut by roughly 40 per cent in Canada and 50 per cent in the United States since the end of 2014.

In order to be profitable with low commodity prices, Calfrac said it is "focused on aggressively managing its cost structure."

So far it is encouraged by results showing a roughly 48 per cent reduction in fixed costs in Canada and a 59 per cent reduction in the U.S.

But the reductions weren't enough to keep the company in the black, with Calfrac reporting a net loss of $24.2 million in the third quarter compared with a net gain of $44.5 million in the same quarter last year.

MEG Energy and Suncor

On Wednesday MEG Energy reported net operating costs of $9.10 a barrel in the third quarter thanks to record-low non-energy operating costs of $5.98 a barrel. The company also lowered its 2015 net spending outlook by $49 million and said it had reduced its workforce by 30 per cent this year.

But again the cost reductions weren't enough to keep the company profitable, with MEG reporting a net loss of $428 million.

Suncor Energy, which had cut roughly 1,300 staff as of July, said cost cutting is paying off after third-quarter results showed its lowest cash operating costs since 2007 at $27 a barrel, compared with $31 a barrel in the same quarter last year.

Suncor Energy chief executive Steve Williams said in a media call Thursday that costs are "pleasantly surprising" so far and that he is seeing increased productivity from contractors at its Fort Hills oilsands site.

"This may well be the first mega-project that is delivered on cost and schedule," said Williams.