Penn West cuts 35 per cent of workers, suspends dividend and puts off $75M in capital spending
Mid-sized producer makes big cuts in face of low oil price environment
CALGARY—Penn West Petroleum Ltd. is cutting its workforce by 400 full-time employees and contractors – most of them working at company headquarters in Calgary.
Most of the job cuts are effective immediately and the rest will be complete by the end of this year, the company said Tuesday.
The jobs represent 35 per cent of the total workforce at Penn West, a prominent mid-sized oil and gas producer.
The workforce reduction is part of Penn West’s response to a recent decline in oil prices. It’s also suspending dividend payments to its shareholders after its next payment in October and reducing compensation for its board of directors.
It has also identified a further $75 million of capital spending that will be put off, reducing this year’s capital budget to $500 million – a 40 per cent reduction from its original plan to spend $840 million in 2015.
For next year, Penn West will aim to keep its capital spending within cash flow generated from operations, with a focus on its light oil properties in the Viking and Cardium shale formations in Western Canada.
“We have made a number of exceptionally difficult decisions in order to remain competitive in the current commodity price environment,” Penn West chief executive and president Dave Roberts said in a 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 estimates that the workforce reduction will reduce spending about $45 million a year. The suspension of its dividend after the previously announced payment of one cent per share on Oct. 15 will reduce annual cash outlays by $20 million.
Payments to non-management directors on Penn West’s board will be cut 40 per cent and the payment to Penn West chairman Rick George will be cut by 50 per cent.