Cenovus to cut 800 jobs, freeze wages after oil slide

JIM POLSON and JEREMY VAN LOON

CALGARY, Alberta (Bloomberg) -- Cenovus Energy Inc., the fourth-largest Canadian oil producer, will reduce its workforce by 15%, the first time in the company’s history it has cut jobs, to tackle an oil-price slump.

About 800 positions will be affected, most of them contractors, Cenovus spokesman Reg Curren said in an email. The company will freeze wages this year and is prepared to further reduce capital spending, CEO Brian Ferguson said during a conference call with analysts on Thursday.

“We’re in for much greater volatility in oil prices for the foreseeable future,” Ferguson said. “My absolute top priority this year is to maintain our financial resilience.”

The announcement to cut jobs is a first for Cenovus, formed in 2009 after it was spun off from Encana Corp. Last month the company lowered its 2015 capital budget to between C$1.8 billion ($1.4 billion) to C$2 billion compared with an earlier target of C$2.5 billion to C$2.7 billion and delayed projects to weather collapsing prices.

The company and its competitors are squeezing spending in oil sands, among the most expensive reserves to develop, after crude prices fell by more than half from a June high. Cenovus will restart delayed drilling plans once prices recover, John Brannan, COO, said on the call.

The shares fell 2.1% to C$24.17 at 11:47 a.m. in Toronto. Cenovus is now valued less than when the stock first traded in November 2009 at C$29.52.

The Calgary-based company is joining a trend that has seen the number of energy jobs cut globally climb well above 100,000 as oil hubs in Scotland, Australia and Brazil, among other countries, empty out, according to Swift Worldwide Resources, a staffing firm with offices across the world.

$20 Range

Crude rose 3.7% to $50.65/bbl at 11:47 a.m. in New York. Citigroup Inc. said oil could drop to “the $20 range” by April as oversupplies build.

The Canadian Association of Petroleum Producers on Jan. 21 reduced its forecast for western Canadian oil production to 3.6 MMbopd in 2015, about 65,000 barrels less than predicted in June.

Capital spending in western Canada’s energy industry will fall 33% to C$46 billion this year, according to the group’s forecast, including a 24% decline in oil-sands investment. The number of wells drilled in the region is expected to drop 30% to 7,350.