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An oil field worker walks up a flight of stairs near wellheads that inject steam into the ground and pump oil out at the Cenovus Energy Christina Lake Steam-Assisted Gravity Drainage (SAGD) project 120 km (74 miles) south of Fort McMurray, in this file photo.

Todd Korol/Reuters

Canada's energy industry is bracing for more budget cuts and possibly another wave of layoffs even as crude prices edge up from multiyear lows.

Major oil and gas companies will begin rolling out financial results this week that will reflect the first full quarter of severely depressed oil prices, triggering what could be a third wave of cutbacks in a sector rocked by one of the worst downturns in years.

The sharp plunge in U.S. and world oil prices since last summer has wiped billions of dollars from capital budgets, hammered corporate profits and led to thousands of job cuts in Alberta's dominant industry. Investor dividends have been chopped and growth prospects in the oil sands have been thrown into neutral, as long-term projects get shelved.

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Industry cash flow after taxes is expected to shrivel this year to levels not seen since the late 1990s, reflecting sinking commodity prices and soaring costs in a region once viewed as a key driver of North American oil production growth.

"We think there's more room to go down," said Peter Tertzakian, chief energy economist at ARC Financial Corp. in Calgary. "It's not going to be a significant step down in [capital expenditures] this time around, but I think you will see some more budget pullbacks."

Alberta and other energy-producing regions are feeling the brunt of the months-long oil rout, despite signs that crude prices are firming up.

Unemployment in the province, for years among the country's lowest, has ticked up to 5.5 per cent, well under the national rate of 6.8 per cent, but a marked change from recent years. Jobless claims in the province shot up 29.4 per cent in February – the second consecutive month with an increase of more than 20 per cent and the largest jump since the depths of the 2009 recession, according to Statistics Canada.

Alberta faces a cash crunch of as much as $7-billion, and has announced plans to slash about 1,700 jobs in health care. In the oil patch, cuts that started with contractors and crews on drilling rigs have spread fast to white-collar jobs in head offices as producers dig in for a prolonged slump.

It adds up to an abrupt slowdown after years of torrid growth, as energy firms struggle to claw back costs to stay competitive in one of the world's most expensive crude oil plays.

"If things continue or they deteriorate from here, I think we may go into another wave of cuts and adjustments in the market," said Brian Reidy, managing consultant in the Calgary office of professional services firm Towers Watson, which advises large oil companies on staffing.

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Big oil and gas companies have shed thousands of positions from industry payrolls in recent months, but those numbers don't reflect the spillover effects on companies that supply the industry with everything from drilling equipment to catering services.

A 41-per-cent drop in drilling activity across Western Canada this year is forecast to eliminate an estimated 3,400 direct jobs, for example. But the wider impact could see another 19,500 indirect positions axed, as fewer workers visit restaurants and hotel stays drop.

The skid in oil prices began last June as soaring U.S. shale output combined with lacklustre economic growth in key markets such as China and Europe.

The rout accelerated in November after members of the Organization of Petroleum Exporting Countries stood pat on production quotas. It has since spread through all quarters of the fossil fuels sector, hitting capital plans and employment levels from the oil sands to shale deposits and the icy waters of the Beaufort Sea.

More jobs could disappear as corporate spending shrivels. As of the end of the first quarter, 47 Canadian energy firms are expected to spend a collective $38.7-billion this year, down 30 per cent or $16.4-billion from $55.2-billion in 2014, according to data compiled by investment dealer Macquarie Group Ltd.

The eight largest companies – including oil sands powerhouses Suncor Energy Inc., Cenovus Energy Inc. and Canadian Natural Resources Ltd. – make up the bulk of the cuts in terms of dollars. Their combined spending will drop to $26.9-billion this year, down 25 per cent, or $8.9-billion, from $35.9-billion last year, according to Macquarie. All of them sport slimmer budgets compared with last year.

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The raw budget figures do not capture the financial panic that has gripped the industry. Budgets for 2015 have been nothing more than drafts, as gyrating crude prices force companies to make revisions on the fly.

"Everybody's uncertain," said Jim Fearon, vice-president with industry recruitment firm Hays Oil & Gas.

"They're positioning themselves in a way that they've got control of their spending, that they've got their head count and their staffing needs at a level that they need to execute the projects that they deem essential," he said. "It's really a sort of preparation of the business to see what happens next."

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