CALGARY – The new chief executive of Cenovus Energy Inc. unveiled plans for a leaner oilsands company Thursday, announcing hundreds of job cuts, lower-than-expected 2018 capital spending and the departure of three key executives.
Alex Pourbaix, who replaced Brian Ferguson at the Cenovus (TSX:CVE) helm last month, said the company will move to get its financial house in order one year faster than planned under the previous regime.
“We will build on the success of our divestiture program and work to exceed the goal, established in June of this year, of achieving $1 billion in cumulative capital, operating and general and administrative cost reductions with the aim of accelerating these reductions over the next two years instead of three,” he said in a statement.
The announced target of a 15 per cent workforce reduction will translate to between 500 and 700 employees and contractors from a recent staff count of about 4,200, spokesman Brett Harris said.
The bad news for Cenovus employees follows cuts of 1,500 staff in 2015 and 440 in 2016 in response to oil prices which tumbled from over US$100 per barrel in mid-2014 and have remained low.
Financial analysts applauded Cenovus’s belt-tightening.
Oilsands analyst Nick Lupick of AltaCorp Capital pointed out that Cenovus’s average production target of 493,000 barrels of oil equivalent per day in 2018, up four per cent from this year, is in line with expectations despite its capital spending budget of $1.6 billion coming in well below consensus estimates of $2.1 billion.
The 2018 budget matches the $1.6 billion it expects to spend this year.
The company plans to continue construction of a new 50,000-barrel-a-day phase at its Christina Lake oilsands project in northern Alberta, but will choke back other spending in both oilsands and conventional oil and gas operations.
It plans to spend $270 million in 2018 on the Christina Lake expansion which is to begin producing in mid-2019. The company noted the capital cost is now expected to be about $675 million, one-fifth lower than previously estimated.
Harris said the deferral of work on growth projects will allow the company to reduce staff in those areas.
It will also reduce workers as it completes the sale of four major asset packages and looks to sell a package of non-core conventional assets in the Deep Basin on the northern Alberta-B.C. border. The four deals are to bring in a total of $3.7 billion to help pay for the buyout of most of the Canadian assets of Cenovus’s Houston-based oilsands partner, ConocoPhillips, for $17.7 billion earlier this year.
Other cuts will come from efficiencies across the company, Harris said.
Cenovus announced Thursday that Kieron McFadyen, president for upstream oil and gas, would leave the company next month and his role would be absorbed by Drew Zieglgansberger, executive vice-president for the Deep Basin.
It also said Bob Pease is leaving his position as downstream president and director of U.S. operations and his role will be assumed by Keith Chiasson, who heads up oilsands production operations.
Ivor Ruste, the company’s chief financial officer since it was spun off from EnCana Corp. in 2009, is to retire in April. A search has been launched to find a replacement.
Harris said the executive changes were decided upon following meetings between Pourbaix and senior managers.
Pourbaix was chief operating officer for pipeline company TransCanada Corp. until last spring.
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