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As Canada’s oil industry resizes itself to fit a sub-US$50 oil world, Penn West Petroleum Ltd. and ConocoPhillips’ Canadian unit announced 900 combined layoffs Tuesday, kicking off what is expected to be another wave of belt-tightening.
Also Tuesday, Pengrowth Energy Corp. joined Penn West in cutting its dividend.
In the early days of the oil price collapse last winter, the downsizing came reluctantly after years of labour shortages and largely did away with excesses.
As hopes for a quick price recovery evolved to consensus that OPEC’s price war to recapture market share from North American producers could mean low oil prices for years, the axe kept swinging and aimed at more targets — dividends, non-core assets, office space, perks.
Nine months into the oil price collapse, after a summer of still-worsening conditions, downsizing announcements have the feel of desperation. Canada’s oil and gas industry, powerless to influence global oil prices, is dismantling by a thousand cuts what took decades to build.
“Good luck to all of us,” is how an analyst concluded Penn West’s conference call Tuesday to explain the latest moves, reflecting the gloom.
Penn West said the 400 layoffs — mostly at its Calgary headquarters — are effective immediately. They represent 35 per cent of its workforce and savings of $45 million a year.
In addition, the mid-sized oil producer is suspending its dividend to save another $20 million a year, reducing board compensation, reducing capital spending by $75 million to $500 million in 2015.
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