File photo of pump jacks at an Encana well near Standard, Alta.Todd Korol/The Globe and Mail
Encana Corp. is expected to announce staff cuts on Friday along with sharply weaker financial results as the company copes with the extended skid in oil prices.
Like the bulk of its rivals, Encana has scaled back drilling, especially in Canada, and that division is taking the brunt of the terminations, a source close to the company said.
The cuts affect "a little over 200" staff, according to an internal memo from Encana chief executive Doug Suttles, issued late on Thursday.
The layoffs represent the first sizable cut since the company introduced a new, more focused North America-wide strategy under Mr. Suttles in late 2013, a few months after he was hired. He was brought in to cure several ills at the company, including an overabundance of assets around the continent and heavy reliance on natural gas markets. At the time, 20 per cent of staff, nearly 1,000 workers, were let go.
Encana's latest reductions add to thousands of job losses in the Canadian oil patch since the collapse in oil prices late last year.
"We're aligning our organization with the well-documented and dramatic portfolio transformation we've delivered over the past year and a half. We expect some staff reductions, but not at the scale of what we undertook in 2013. Consistent with strategy we continue to build a company that can thrive through the commodity cycle," the statement said.
FirstEnergy Capital Corp. analyst Michael Dunn wrote in a report on Thursday that he had heard reports of layoffs at Encana from mutliple sources this week.
Royal Dutch Shell PLC, Suncor Energy Inc., CNOOC Ltd.'s Nexen Energy, Chevron Corp. and Cenovus Energy Inc. are among large producers that have handed out pink slips to employees this year as the industry has struggled to deal with precipitous drops in cash flow with oil prices down by half from around $100 (U.S.) a barrel 12 months ago.
This week, crude has dipped below $50 a barrel for the first time since April, adding to the sector's woes.
Energy service companies and construction contractors have also laid off legions of field workers as the sector has slowed down, heaping pressure on the shaky Alberta economy.
Encana's second-quarter cash flow – the money for reinvestment into operations – is expected to be down about 65 per cent from the same period of 2014, according to an average of analysts' estimates compiled by Bloomberg.
Encana has made other moves aimed at navigating the slowdown following an acquisition spree last year that included $9-billion of asset purchases, mostly in U.S. shale-oil plays.
Early this year, it issued $1.4-billion of stock to help reduce debt. It also cut annual spending by $200-million (U.S.) to $2-billion.
Mr. Dunn wrote that he expects the company to report improvements in its cost structure, which could help investors look beyond production results that "may not inspire."
Jeffrey Jones