Shell and Cenovus reduce jobs and spending

CALGARY –Shell and Cenovus are slashing more jobs as the companies see low second quarter earnings.

At Cenovus Energy Inc, this includes a slash of 400 jobs (following a reduction of 800 jobs early this year) which the company says are “no longer required because of a decrease in work due to the continued low oil price environment.”

On the company’s earnings call, president and CEO Brian Ferguson said, “It is always difficult when we have to let staff members go,” adding that the company did not come to its decision lightly.

However, the continued fall in oil prices has forced Cenovus executives to focus on reducing its costs and Ferguson said Thursday’s additional job cuts will save the company $100 million annually.

It wasn’t the only oilsands producer to announce staff cuts Thursday. Royal Dutch Shell’s Canadian arm confirmed it has laid off 400 people this year, in addition to the roughly 300 jobs the company cut in the oilsands in January.

“They are reductions that have happened already,” Shell Canada spokesperson Cameron Yost said. He confirmed that all 700 job cuts were in the company’s heavy oil division and split between field positions in Fort McMurray and office jobs in Calgary.

Shell Canada has realized $450 million in annual cost savings so far this year, Yost said, adding that staff reductions account for a small part of that number.

Those cuts are part of a global downsizing Shell announced in Europe Thursday, when the company said it has been cutting 6,500 jobs worldwide as a result of the oil price collapse.

In addition to its own cuts, Cenovus said it was reviewing its benefits, perks and compensation practices in light of the now yearlong oil price rout, “to ensure they align with current and anticipated market conditions.”

Many energy sector companies in Alberta have reduced salaries in light of the oil price swoon, which began last summer. The West Texas Intermediate benchmark price rose slightly midday Thursday to US$48.89 per barrel – still under half of the commodity’s price at the same time last year.

Cenovus’ second quarter results show the company has been able to cut $280 million in costs so far this year, not including the $100-million cuts announced Thursday, and Ferguson said those initial savings are already 40 % higher than the company’s initial targets.

Still, the company reduced its dividend by 40 % to $0.16 per share Thursday, as it posted $126 million in net earnings in the second quarter, which is an 80 % drop from the same period last year.

The pain from collapsed oil prices, however, was not shared equally across oilsands producers.

Suncor Energy Inc., which released its second quarter results after markets closed Wednesday, stunned the market with a massive earnings beat and increased its dividend by one cent to $0.29 per share.

“Despite a very challenging macroeconomic environment, we delivered on our commitments in these (capital discipline and operational) areas,” Suncor’s president and chief executive officer Steve Williams said on his company’s earnings call.

Canadian PressThe Suncor Refinery in Edmonton.

The company has been trying to drive down its costs by between $600 and $800 million between 2015 and 2016. “We are well on our year to accomplishing that in this year alone,” Williams said.

Equity and credit analysts were delighted with the company’s performance. “Suncor bucks the trend, announcing modest increases in shareholder returns as it benefits from its integrated operations, posting strong refining results while improved oilsands a lower Canadian dollar partially offset substantially lower benchmark oil prices,” Moody’s senior vice-president Terry Marshall said in an email.

Still, Suncor did acknowledge that lower oil prices are having an effect and cut its capital budget for the second time this year, this time by $400 million, to a spending target between $5.8 billion and $6.4 billion.

Last week, Wood Mackenzie released a report that showed spending cuts in the oilsands helped reduce global energy-sector capital spending plans by US$200 billion this year. “The upstream industry is winding back its investment in big pre-FID developments as fast as it can,” the report’s authors wrote.