|
Canada cuts go deeper, wider
Not that there was any doubt, but March 18 and 19 provided ample proof of deepening woes in the Canadian oil patch.
Big players Nexen (owned by state-owned China National Offshore Oil Corp.), ConocoPhillips and Talisman Energy (recently taken over by Spain’s Repsol) laid off hundreds of employees.
ConocoPhillips said it was reducing its Canadian headcount by 200, or 7 percent of its payroll, because of the “challenging economic environment.”
Nexen announced that 600 of its employees in Canada and 60 at its North Sea unit in the United Kingdom would lose their jobs, while Talisman said its head office staff in Calgary would be reduced by 150 to 200.
Canadian industry layoffs since low crude prices started taking a bite in February now number in the thousands, mostly in upstream field operations, but the addition of white collar staff shows the downturn has entered a new phase.
Jackie Forrest, an economist at ARC Financial, said the trend is likely to continue as companies adjust their spending plans and face the prospect of even lower oil prices over the next few months.
Alan Kearns, president of Calgary-based CareerJoy, told the Financial Post he expects a gloomy year as engineering, construction and service companies join the movement to scale back their operations.
He said his firm has been approached by a number of energy-sector companies seeking help in trimming payrolls.
BMO Capital Markets analyst Iain Reid said in a research note that fourth-quarter earnings have missed forecasts by about 17 percent.
Storage volumes Companies have also been “spooked” by the rapid increase in crude storage volumes across North America, said John Kilduff, a partner in the hedge firm of Again Capital.
He said there has been no let-up in oil imports, or in domestic production, while refineries are operating below 90 percent of capacity.
Kilduff said that if storage at Cushing, Oklahoma, hits expected capacity levels there will be no market for surplus production.
But Forrest questions that fear, suggesting imports into the United States will decline as North American crude prices weaken against international levels.
She said that “even if we were to continue at the current pace” a physical constraint would not be likely to occur in the United States until early June.
“I don’t think we’re going to see the inventory builds continue at this pace,” Forrest said.
But she did concede that rapidly filling storage tanks will put “pressure on North American markets for some time to come.”
“Even if we do see tight oil pull back by mid-year, it’s likely these inflated inventory levels will stick around for another year,” she said. “And that’s going to weigh on prices.”
- Gary Park
| 