CALGARY – A fresh wave of layoffs is hitting Alberta’s energy sector, with two oil and gas companies announcing 900 job cuts on Tuesday, mostly in Calgary, and analysts saying they see more on the way.
Penn West Petroleum is reducing its workforce by 35 per cent for a loss of over 400 full-time employees and contractors.
And ConocoPhillips Canada plans to lay off 400 employees, or 15 per cent of its workforce, plus 100 contractors.
Penn West (TSX:PWT) said most of the job cuts announced Tuesday are effective immediately, while ConocoPhillips — which informed employees of its decision a day before making it public — said its workforce reduction will happen by mid-October.
The job cuts come as the industry continues to grapple with oil prices below US$50 a barrel, compared with more than US$100 a barrel last summer, with no big recovery in sight.
“We don’t see a lot of correction in the short term,” ConocoPhillips spokesman Rob Evans said Tuesday.
“It’s really kind of changing the way we work and that’s resulting in, unfortunately, some staff reductions.”
Evans said the ConocoPhillips cuts are part of a 10 per cent global reduction in staff by the major U.S. producer in the current low-price environment.
Penn West chief executive Dave Roberts said Tuesday on a conference call with analysts that he expects the current cycle to be “prolonged and increasingly volatile” and has been forced to make cuts to weather the storm.
To reduce spending Penn West has not only cut jobs, but also suspended its dividend, cut board compensation by 40 per cent and further reduced this year’s capital budget.
The company is now planning $500 million in capital spending this year, a 40 per cent reduction from its original plan for the year, and will further reduce spending next year by $140 million to $250 million from this year’s level.
The cuts are necessary as Penn West struggles with a high debt load, says FirstEnery Capital analyst Michael Hearn.
He said the company will need to sell assets to deal with its debt, but that mergers and acquisitions have been “sterilized” in the province with the new government and royalty review.
“As a board of directors how do you make a call on a significant investment when you don’t know what the royalties are going to end up being?” said Hearn.
He said could see more cuts coming as low prices persist.
“Certainly in this commodity environment, I don’t think it’s any surprise to anyone that there’ll be more cuts across the board.”
Alberta Jobs Minister Lori Sigurdson said in an interview that the province could feel the impact of more cuts since the economy is so focused on the energy sector.
“We have so much dependence on the oil and gas sector, so we’re so vulnerable, and so it may get worse,” said Sigurdson.
She said the government will announce a jobs plan along with the budget in the fall that will support other sectors like small businesses and alternative energy to diversify the economy.
“Our government wants a more stable economy, so we’re not so vulnerable to these highs and lows.”
The Canadian Association of Petroleum Producers estimates Alberta’s oil and gas sector has already lost 35,000 jobs this year.