Canada’s Penn West to cut workforce 35 percent, slash spending

HOUSTON — Canadian oil and gas producer Penn West Petroleum said Tuesday it is planning by the end of the year to cut 400 employees and contractors, around 35 percent of its workforce, suspend its dividend and cut costs in an effort to support its balance sheet amid low oil prices.

The layoffs, which will largely affect the company’s main office in Calgary, will save Penn West about $45 million annually, and most of the cuts are effective immediately. This will add to the 176,000 oil workers laid off around the globe in the past several months, according to energy recruiter Swift Worldwide Resources.

“We have made a number of exceptionally difficult decisions in order to remain competitive in the current commodity price environment,” Penn West President and CEO Dave Roberts said in a written statement. “We view the cost reductions as sustainable and we will remain well positioned for the potential expansion of development activities and capital programs in the future.”

Penn West, which drills light oil reservoirs in the Viking and Cardium formations in Alberta, Canada, said it will reduce its capital spending budget to stay within the amount of cash it brings in from drilling for oil and gas, having identified $75 million in investments it will defer. Its capital spending will come it at $500 million this year, down 40 percent from the amount it initially planned to spend when it made its budget last November.

The company also said it will stop paying its investors a quarterly dividend after its October payment of 1 cent a share. That will save it $20 million annually. The firm’s board of directors will also take a cut in compensation, as its board chair’s annual retainer will be cut in half and other directors will have retainers reduced by 40 percent.

The company’s sale of $1.5 billion in oil and gas assets over the last two years has allowed it to cut its debt by one third. And it has cut those costs 20 percent in that time, and since last summer, its drilling costs at its main properties have come down 20 percent to 30 percent as oil field service companies cut prices for services and equipment. Further asset sales will help reduce its overhead costs by another 15 percent to 30 percent, it said.

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