Canadian Oil Jobs Cut as Companies Slash Deeper Than 2008

Another round of oil job cuts is rolling through downtown Calgary this week with three producers eliminating at least 650 positions in Canada as they wrestle with prices near a six-year low.

ConocoPhillips is the latest, announcing Wednesday it’s terminating 200 people, about seven percent of the Houston-based company’s Canadian workforce. That follows cuts Tuesday by Talisman Energy Inc., which is eliminating 150 to 200 positions in its Calgary head office and Cnooc Ltd.’s Nexen Energy, which is reducing its Canadian headcount by 300.

Cutting jobs is one lever energy companies are pulling as they reduce capital spending to adjust to lower cash flow after crude’s 60 percent slide since June. The latest measures add to thousands of jobs lost in Alberta earlier this year as producers slow development of the province’s oil sands, the world’s third-largest proven reserves.

“We are seeing pretty aggressive cuts in terms of labor reductions and we didn’t really see those cuts to the same degree last time,” said Randy Ollenberger, a Calgary-based analyst at BMO Nesbitt Burns Inc., referring to the 2008 oil price collapse. “This time, this is due to a fundamental imbalance in the oil and gas industry itself, so companies are taking action under the presumption it might take longer to fix.”

ConocoPhillips is reducing spending by one-third this year, while Calgary-based Talisman plans to spend 30 percent less. Cnooc, the Chinese parent of Nexen, is lowering its budget by as much as 35 percent.

Price Slump

The U.S. benchmark crude price touched $42.03 a barrel on Wednesday, the lowest in six years.

The ConocoPhillips cuts announced Wednesday to employees are in line with the company’s global capital spending reductions, as its Canadian projects aren’t slowing, said Kristen Ashcroft, a spokeswoman.

Athabasca Oil Corp., another Calgary-based energy company, also this week said it has reduced its head office workforce by half since the beginning of 2014 to lower costs. The cuts amounted to about 150 jobs, said Matt Taylor, a spokesman.

Chevron Corp., the global oil major based in San Ramon, California, is several months into a review of its Canadian business to make it more efficient and effective, said Cam Van Ast, a spokesman. He declined in an e-mail to comment on any staffing implications of the review.

Industry Woes

The Calgary cuts are only the latest in an industry that has been idling rigs and scrapping projects to hunker down amid a precipitous price drop, since the Organization of Petroleum Exporting Countries in November maintained its production quota despite a global glut.

Suncor Energy Inc., Canada’s largest oil company, in January said it would cut 1,000 jobs as it lowered its budget and delayed projects. Schlumberger Ltd., the world’s biggest oilfield-services company, the same month announced 9,000 job cuts.

The number of energy jobs eliminated globally has climbed well above 100,000 in the wake of falling oil prices, according to a February estimate from Swift Worldwide Resources, a staffing firm with offices across the globe.

Canadian jobs in the natural resource sector were down 16,900 last month. Alberta, home to the bulk of Canada’s oil output, posted a 14,000 decline in employment and its highest jobless rate since 2011, rising 0.8 percentage points to 5.3 percent.

Other Industries

Even as Canada’s oil industry slices deep into its workforce, employment across Alberta isn’t poised to suffer as much as in 2008, said Todd Hirsch, chief economist at ATB Financial, the provincial government-owned bank.

Some unemployed energy workers including lawyers and accountants are likely to get scooped up by companies in other industries set for record years, such as forestry, tourism and agriculture, Hirsch said. While Albertans are nervous about their jobs now, the energy industry will come out of the price rout stronger, after getting rid of cost inflation and waste, he said.

“A good downturn like this every so often is useful because it does weed out the inefficient players and the stronger players become even better,” Hirsch said. “When oil’s at $107 a barrel, people’s expectations for salaries and bonuses and every Friday off are outside of reality.”