Oil Sands Job Cuts Continue as Cenovus Axes 15% of Workers

(Bloomberg) -- Cenovus Energy Inc., which has been selling assets to pay off debt from a major oil-sands acquisition, plans to cut about 15 percent of its workforce as the new chief executive officer steps up cost cuts.

The Canadian producer will shed 500 to 700 jobs, out of about 4,200 positions, Brett Harris, a spokesman for the Calgary-based company said.

Alex Pourbaix, who took the helm about a month ago, also is shuffling the company’s top ranks, with Chief Financial Officer Ivor Ruste and two other top executives departing. The announcements on Thursday came as part of Cenovus’s 2018 budget report, which detailed a capital-spending program and oil-production forecasts that trailed some analysts’ expectations.

Pourbaix is moving quickly to repair Cenovus’s balance sheet, which took a hit after the company spent $13.3 billion to buy ConocoPhillips’ oil sands operations earlier this year in a deal that doubled its reserves and production. Cenovus has sold a group of legacy assets to pay off a bridge loan that funded the acquisition, but it’s working to reduce its debt load further to reassure investors it can withstand a turbulent oil-price environment.

“Cenovus’s new CEO is laying the ground work for a better day, and we anticipate more updates will come over the next few months as management gains its footing,” Justin Bouchard, an analyst at Desjardins Capital Markets, said in a note. “Cenovus is very much a company in transition, and 2018 will be critical.”

Executive Shuffle

In addition to Ruste’s departure, upstream chief Kieron McFadyen will leave the company next month, and downstream head Bob Pease is leaving immediately. The company will conduct a search for Ruste’s replacement, considering both internal and external candidates. Drew Zieglgansberger, currently head of the company’s Deep Basin operations, will take over the upstream business, while oil-sands production head Keith Chiasson will lead the downstream unit.

Cenovus is forecasting average production of 483,000 to 510,000 barrels of oil equivalent a day in 2018. The 496,500-barrel midpoint of that range trailed the 505,700-barrel average of analysts’ estimates compiled by Bloomberg.

The shares fell 2.5 percent to C$11.62 at 1:18 p.m. in Toronto. Cenovus had slid 41 percent this year through Wednesday, compared with a 12 percent drop for the S&P/TSX energy index.

Output from the oil-sands operations will increase about 26 percent from the company’s 2017 outlook, mostly due to the Conoco acquisition, Cenovus said. Per-barrel operating costs in the unit will drop 8 percent, the company projected.

Total capital spending will be C$1.5 billion to C$1.7 billion, the company said. Analysts estimated C$2.03 billion, according to projections compiled by Bloomberg.

“The new budget is positive in that it sends a clear message regarding capital discipline, particularly for a company facing numerous headwinds,” Bouchard said in the note.

©2017 Bloomberg L.P.