Husky loses bark and bite, chops 1,400 jobs

Non-core assets to be sold; dividends will be paid in shares; Imperial down from last year, but reports profits, cites cost cutting

GARY PARK

For Petroleum News

The Canadian petroleum industry is so numbed with the layoffs that occur almost on a daily basis that the latest announcements scarcely attract more than passing glance.

But even the most hardened observers were forced to admit the trend is going from bad to worse on Oct. 30 when Husky Energy, a long-time pillar of the oil patch, said it was chopping 1,400 jobs, or 22 percent of its workforce.

It also said its next scheduled dividends will be paid in shares - which have dropped over the last year to C$2.60 from C$29.48 - instead of cash.

Even the normally serene Chief Executive Officer Asim Ghosh was moved to describe the action as a “bitter pill.”

For more than 20 years, the Calgary-based company has been a gem in the collection of Li ka-Shing, the richest man in Asia.

His corporate holdings control 70 percent of Husky, which has strongholds in the Alberta oil sands, Canada’s East Coast offshore and the South China Sea, plus joint-venture stakes with BP in Canadian and U.S. refineries.

“You’ve heard me say before that we jealously guard our human resources,” Ghosh told analysts.

To that extent, Husky said its cuts would affect only 280 full-time employees, with the rest involving contract workers, but cautioned that more could be required as its business plan is revised.

Non-core sales

Rob Peabody, chief operating officer, said “we are transitioning from a large number of small plays into a business with a focus on fewer but more material plays.”

“It is becoming increasingly evident that there is inherent instability in OPEC and going forward its ability to manage prices is not something one should build a business plan on,” Ghosh said.

“In such an environment, market forces rule. It’s equally evident that the current oil supply/demand imbalance will take time to correct itself. In light of these factors Husky is continuing to fortify its business for the future, not just lower for longer, but higher price volatility.”

With the changes, he said Husky is aiming to make its balance sheets “bulletproof” and operations profitable at low commodity prices, using US$40 a barrel for West Texas Intermediate and C$3 for AECO natural gas (which it doesn’t see recovering for a long time) for the next two years.

The company reported production from its operations of 330,000 barrels of oil equivalent per day, down only 8,000 boe per day in the same period of 2014.

Imperial a shred of encouragement

Chief Executive Officer Rich Kruger attributed the results to strong production growth and more than C$1 billion in reduced costs, while output from its Kearl oil sands project in Alberta ramped up to 181,000 bpd from 78,000 bpd.

Imperial has not reduced its payroll of 5,500 and plans to “maintain a lean and efficient organization throughout the range of business cycles,” he said.

One of the latest counts of the damage done this year came from a Canadian government agency, which reported there were 52,800 fewer people working in Alberta in August than a year earlier, on top of 20,900 job losses in July. Those numbers point to a more rapid decline than earlier Alberta government and industry figures of 36,000 cuts in the oil patch so far this year.

Even Alberta Premier Rachel Notley expressed concern for the families of those joining the jobless ranks.

“Our government is, and has been right from the very beginning, very concerned about the strain and the stress and the anxiety that job losses mean (for families and communities),” she told the legislature.