Oil-service firms are slashing jobs and pay for executives as the fallout from tumbling crude prices spreads through the energy industry's supply chain.
Trican Well Service Ltd. and Calfrac Well Services Ltd. are among the latest Canadian service companies to feel the pinch from deep cuts in oil producers' capital spending and a slowdown in drilling activity across North America.
Trican said this week it has axed about 600 jobs from its operations in the United States and Canada, and instituted a 10-per-cent average pay cut for employees effective Feb 1.
Calfrac slashed executive pay by a similar amount and said directors would take a 20-per-cent haircut starting in April. Calfrac is also shuttering operations entirely in Colombia, while Trican has suspended operations in the Latin American country.
The moves mark new contractions in an industry struggling to cope with oil prices that have been cut in half since last summer.
Companies that supply energy producers with hydraulic fracturing services and other equipment are under increasing pressure to cut rates as larger firms rein in spending and new activity grinds to a halt.
"The pressure is there," Fernando Aguilar, president and chief executive of Calfrac, told analysts this week. "We've seen people parking fleets already. We've seen customers asking for more … so the marketing's very competitive."
This week, 289 rigs were operating in Western Canada, or 37 per cent of the industry's total fleet, according to the Canadian Association of Oilwell Drilling Contractors. That's down from 317 rigs operating last week and well under levels a year ago.
Trican said late Wednesday it expects to idle as much as 25 per cent of its equipment in Canada by the end of the first quarter. It made similar moves in the U.S. and shut an operating base in Texas in a bid to claw back costs.
The Calgary-based company said fourth-quarter profit was $4.9-million, or 3 cents a share. That compares with a loss of $20.8-million, or 14 cents, in the same period a year ago. Profit plunged 88 per cent from the third quarter, however, amid a steep drop-off in drilling activity. The company now expects pricing levels for some services to fall 10 per cent in Canada and by as much as 20 per cent in some U.S. regions this year.
Calfrac this week said fourth-quarter earnings more than doubled from a year ago to $26.5-million, or 28 cents a share. However, profit was down sharply from the third quarter, falling roughly 40 per cent from $44.5-million.