Ovintiv cuts staff as oil recovery fears grow

Fears of persistently lower demand for oil are hitting home for industry workers as the world economy slowly strengthens following the deepest disruptions of the COVID-19 crisis.

Oil and gas producer Ovintiv Inc. is the latest to reduce staff, confirming it handed layoff notices to about 650 of its 2,600 staff in Canada and the United States starting on Monday.

“We feel like the industry and Ovintiv is transitioning to lower production growth levels. We just feel that’s the direction we’re headed,” said director of communications Cindy Hassler in an interview.

“The new model we feel going forward will combine free cash generation, stronger balance sheet and modest growth. So more at maintenance activity levels.”

The company, which moved its headquarters from Calgary to Denver last year and changed its name from Encana

Corp., has also dramatically reduced activity in the field to address fossil fuel demand destruction and the oil price collapse caused by the pandemic, she said.

In May, the

PetroLMI Division of Energy Safety Canada reported more than

7,700 oil and gas sector jobs were lost in April in Canada, with 6,500 of the lost jobs from the oilfield services sector.

Moody’s Investors Service, meanwhile, warned in a report Thursday that recessionary forces and weaker long-term growth expectations will reduce corporate and household demand for oil at the same time that consumers embrace increasing use of biofuels, electric vehicles and improved engine efficiency.

“Oil demand may take a long time to recover to 2019 levels due to the combination of weaker economic growth, decarbonization trends and behavioural shifts, increasing the possibility that demand peaked in that year,” said James Leaton, vice-president and senior credit officer at Moody’s, in a news release.

The credit rating agency considered scenarios where oil demand is either three or five per cent lower than 2019 levels going into 2021.