Suncor Energy Inc. is shedding more staff to prepare for lean times in the oil industry to last longer, even as crude prices climb above $40 (U.S.) a barrel for the first time in 3 1/2 months.
Suncor, Canada’s largest oil company, is reducing its work force by an unspecified number, partly in response to deferrals of big-ticket expansion projects in the oil sands and at a Quebec refinery.
Spokeswoman Sneh Seetal said she could not provide a precise tally, but that the reductions will not climb into the thousands. The cuts follow a reduction of more than 1,700 workers last year, representing about 12 per cent of total staff.
The company’s previous layoffs contributed to more than 41,000 direct job losses in the oil industry as crude prices sank from more than $100 a barrel in mid-2014 to just above $26 last month. On Thursday, U.S. benchmark crude settled up $1.74 at $40.20 a barrel, its highest since Dec. 3.
Suncor chief executive officer Steve Williams informed employees of the new round of cuts this week.
He is looking to run lean as commodity prices still look uncertain, despite the recent oil-price runup. When it announced its loss-making fourth-quarter results last month, Suncor said it was shelving a heavy oil processing unit at its Montreal refinery and future expansions of its steam-assisted oil sands projects.
“As those business decisions are made, our work-force requirements will change and unfortunately this means some people will leave the organization,” Ms. Seetal said.
“We know this is a stressful time for people. That’s why we’re committed to being as open and transparent with our employees as we can and in fact Steve addressed this topic in his regular quarterly webcast he had with employees on Tuesday.”
The move reflects nagging doubts in the industry that the sharp rally in crude markets will evolve into a meaningful recovery. A weakening U.S. dollar and renewed optimism over a possible deal by some of the world’s top exporters to freeze output at January highs are seen as top reasons for the latest surge.
But an output pact is viewed largely as symbolic and unlikely to restore prices to pre-crash levels, said Judith Dwarkin, an analyst at RS Energy Group in Calgary.
Many members of the Organization of Petroleum Exporting Countries are already pumping at capacity, while global inventories are likely to remain bloated until next year, despite strengthening demand and signs of faltering output from U.S. shale producers, she said.
“I think the fundamentals are such that we’re going to continue to see a pretty large supply overhang even with the freeze,” she said in an interview.
For Suncor, that necessitates tapping the brakes on continuous expansion of oil sands projects, while at the same time completing its $4.2-billion (Canadian) takeover of rival Canadian Oil Sands Ltd. COS shareholders are slated to vote on the deal on Monday.
Suncor’s so-called “replication” strategy was touted by executives as a cheaper method of lifting crude from underneath northern Alberta’s forests. It involves designing cookie-cutter plants to tap pockets of bitumen, rather than a central processing plant to harvest a larger region.
Other cost-cutting moves include deferring large information-technology projects and looking for ways to consolidate work across various departments, Ms. Seetal said.
Analysts have estimated the company’s funding gap this year at $4-billion as spending ramps up on major projects, including its $15-billion Fort Hills bitumen mine and its Hebron joint venture offshore Newfoundland and Labrador. Last month, the company chopped its 2016 budget by 10 per cent to a range of $6-billion to $6.5-billion.
It is far from alone with capital spending cuts. Last week, Crescent Point Energy Corp. slashed its dividend by 70 per cent and deferred $100-million in planned spending until later this year. Canadian Natural Resources Ltd. and Baytex Energy Corp. have also dialled back expenditures this year.
In February, Husky Energy Inc. also announced deeper job cuts, although it did not specify a number.Report Typo/Error
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