CALGARY – Suncor Energy Inc. (TSX:SU), known for its huge presence in Alberta’s oilsands, is reducing its workforce by 1,000 and cutting $1 billion from its capital budget as the company grapples with plummeting crude prices.
Calgary-based Suncor says the job cuts will mainly affect contractors, but include some employee positions as well. Suncor currently has around 14,000 employees.
In November, Suncor predicted capital spending for 2015 would range between $7.2 billion and $7.8 billion. At the time, crude was around US$75 a barrel and the OPEC oil cartel had not yet announced its intention to maintain output rather than cut it in a bid to support prices.
U.S. benchmark crude settled at US$45.89 a barrel on Tuesday, less than half of what it was just six months ago.
“Cost management has been an ongoing focus, with successful efforts to reduce both capital and operating costs well underway before the decline in oil prices. However, in today’s low crude price environment, it’s essential we accelerate this work,” Suncor CEO Steve Williams said in a release.
“Today’s spending reductions are consistent with our commitment to spend within our means and maintain a strong balance sheet. We will monitor the pricing environment and take further action as required.”
Suncor is also targeting operating cost reductions of between $600 million and $800 million over the next two years.
Projects that haven’t yet been given a final go-ahead by Suncor’s board are being deferred, such the MacKay River 2 steam-driven oilsands project in northeastern Alberta and the White Rose development off the east coast, which is operated by partner Husky Energy Inc. (TSX:HSE).
But major projects under construction such as the $13.5-billion Fort Hills mine north of Fort McMurray, Alta., and the Hebron field in offshore Newfoundland are moving ahead as planned, with startup for both targeted for 2017.
With 3.2 billion barrels in reserves, short-term moves in oil prices won’t make or break Fort Hills, said Suncor spokeswoman Sneh Seetal.
“It has a projected operating life of over 50 years. We anticipate that crude will go through many cycles during that 50-year period and, once in operation, Fort Hills has a relatively low break-even cash operating cost estimated at under C$30 per barrel.”
Suncor expects the closely watched U.S. benchmark crude, West Texas Intermediate, to average US$59 a barrel in 2015. Western Canadian Select, the measure of Canadian heavy crude, is expected to be US$42 a barrel. And Brent, the key international benchmark, is predicted to average US$65 a barrel.
On Monday, fellow oilsands heavyweight Canadian Natural Resources Ltd. (TSX:CNQ) announced it would slash its 2015 budget, also announced in November, by 28 per cent. One of its oilsands projects called Kirby North is being deferred and drilling activity in Western Canada is going to be slowed substantially.
Canadian Natural said it does not foresee layoffs, but has frozen hiring.
Last week, Shell Canada Ltd. said it was cutting its workforce of 3,000 at its Albian Sands mining operation north of Fort McMurray by less than 10 per cent.
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