CALGARY, Alta. – There was a splattering of red ink in the oilpatch Thursday, as the steep drop in oil prices weighed on the bottom lines of some of the energy sector’s biggest names in the last three months of 2014.
Oilsands producer Cenovus Energy Inc. (TSX:CVE) said it’s cutting its headcount by 15 per cent, mostly contractors, amounting to 800 positions. Husky Energy Inc. (TSX:HSE) also said there’s been a “small” reduction in its workforce, but declined to get more specific. And Precision Drilling Corp. (TSX:PD) said there’s not enough work these days to keep its crews busy.
“I believe we are in for much greater volatility in oil prices for the foreseeable future and that’s why you’ve seen Cenovus preserve cash by moderating our growth and reducing our workforce,” Cenovus CEO Brian Ferguson said.
Crude prices have been at around the US$50 a barrel mark for much of this year so far, after having hit US$107 a barrel last summer. The drop intensified toward the end of 2014.
Cenovus posted a net loss of $472 million, widening from the previous year’s loss of $58 million.
The results for the quarter included a $497-million charge related to its Pelican Lake oil project in Alberta due to the drop in oil prices and a slowing of the development plan for the project.
Some expansion work at Cenovus’ flagship Foster Creek and Christina Lake oilsands projects is winding down, though phases that are further along in development are continuing as planned.
Last month, Cenovus cut its 2015 capital budget by $700 million to $1.8 billion and $2 billion.
Cenovus has been looking at a deal to get more value out of its royalty lands in Alberta. Although interest has been strong, Ferguson said the timing is bad.
“I don’t want to be guilty of doing the right thing at the wrong time,” he said.
Meanwhile, Husky booked a $603-million net loss during the quarter, compared with net earnings of $177 million during the same 2013 period mostly because of asset writedowns and inventory reductions. Excluding those, Husky’s net earnings for the quarter were $147 million.
It’s shaving up to $400 million from its previous 2015 budget of $3.4 billion and seeking $400 million and $600 million of operational cost savings, mostly from its suppliers and contractors.
Husky produces oil and gas in Western Canada, Southeast Asia and off Canada’s East Coast. It also has refineries and retail fuel stations.
The crude downturn has been particularly tough on companies that are hired by producers to drill wells, like Precision Drilling Corp. (TSX:PD).
Precision announced a net loss of $114 million Thursday, compared with a profit of $68 million in the same 2013 quarter as the industry was forced to adjust to a “swift and severe” decline in crude prices, said CEO Kevin Neveu.
About to 20 to 25 rig hands work on each active drilling rig. Right now about 50 fewer Precision rigs are running than at the same time a year ago, Neveu said.
There just isn’t enough work for those rig hands these days. When things improve, Neveu said Precision will do “everything it can” to get those same crews back.
“Industry downturns are difficult for all, but they affect our rig crews more than anybody else.”