Penn West Scraps Dividend, to Fire 400 Workers as Oil Slides

Updated on
  • Canadian oil producer plans to cut more than 400 jobs
  • Deferring $57 million of capital spending planned for 2015

Penn West Petroleum Ltd., a Calgary-based oil producer, will suspend its dividend, fire 35 percent of the workforce and look to sell more assets after crashing oil prices sent shares tumbling by 88 percent in the past year.

The company is cutting more than 400 employees, including full-time workers and contractors, according to a statement Tuesday. It will suspend its dividend after the Oct. 15 payment and reduce compensation for some board members.

“Penn West’s dividend suspension may place some near-term pressure on the shares,” Gordon Tait, an analyst at BMO Nesbitt Burns, said in a research note. “However, we believe the company is taking appropriate action given the current commodity price environment.”

Chief Executive Officer Dave Roberts has been seeking to turn the oil producer around by selling assets amid criticism that the company has higher operating costs and lower production growth than peers. Penn West has had to sell assets outside its main operations to reduce debt as it confronts obligations to banks.

The shares fell 10 percent to 92 Canadian cents at 9:48 a.m. in Toronto, valuing the company at C$462 million ($351.6 million).

Canadian Energy companies have been curtailing expansion projects and reducing staff after crude fell to a six-year low this year. ConocoPhillips Canada plans to let go of 400 employees and 100 contractors in a 15 percent staff reduction, Canadian Press said today.

Capital Spending

Penn West will also limit capital spending to funds flowing from its operations. It will defer C$75 million of planned investment this year, reducing the 2015 capital budget to C$500 million, down from a November forecast of C$840 million.

“Limiting our capital programs to the funds flow generated from our assets and suspending our dividend are necessary steps,” Roberts said in the statement.

Penn West plans to focus development on its Viking and Cardium light oil properties in 2016. The company lowered its 2015 production forecast to 86,000 to 90,000 barrels of oil equivalent a day from 90,000 to 100,000 barrels previously.

— With assistance by Robert Tuttle

(Updates with ConocoPhillips job cuts in sixth paragraph.)
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