Cenovus to lay off up to 25% of workers

Most of the cuts to come in Calgary as firm merges with Husky Energy

CALGARY— Cenovus Energy Inc. is aiming to cut as many as one in four jobs — potentially more than 2,000 workers — if it succeeds in its $3.8-billion friendly takeover of rival Husky Energy Inc.

The oilsands producer plans to trim between 20 and 25 per cent of the 8,600 employees and contractors currently working at the two companies, said Cenovus spokesperson Reg Curren in an email on Tuesday, two days after the takeover was announced.

That would equate to between 1,720 and 2,150 workers. Curren said most of the cuts are expected to take place in Calgary, where both companies have downtown headquarters.

“As with any merger of this type, there will be overlap and there will be some difficult decisions as we work to create a combined organization best positioned for the future,” he said. “The estimate is that the reductions will be approximately 20 to 25 per cent of the combined workforce, which is currently about 8,600 employees and contractors.”

It’s the latest blow to the Calgary-centred oil and gas sector after Suncor Energy Inc. announced three weeks ago it will cut as many as 1,930 jobs over 18 months to reduce total staff by 10 to 15 per cent.

Job cuts are also expected in the Canadian operations of Royal Dutch Shell, which announced in September it would eliminate between 7,000 and 9,000 jobs worldwide by the end of 2022, and, to a lesser extent, from BP, which said in June it would cut around10,000 jobs from its global workforce.

The cuts could make worse Calgary’ s country-leading downtown office vacancy rate, which climbed to 28.7 per cent as of the end of September from 27 per cent in June, according to Greg Kwong, regional managing director for real estate firm CBRE in Calgary.

“The market is quite bad right now and to layer on more sublease space … makes quite a difficult market from a landlord’s perspective,” he said, noting lease rates have fallen as the vacancy rate rises. “It’s been happening on a smaller scale for quite a few years where smaller producers, smaller oil and gas companies are merging or trying to find efficiencies or laying off people.”

The pandemic early this year caused demand for fossil fuels to plummet, leading to lower oil prices and causing Canadian companies to cancel more than $8.6 billion in capital spending and cut19,000 jobs, according to the Canadian Association of Petroleum Producers.

Under the proposed all-stock transaction, Cenovus shareholders would own 61 per cent of the combined company and Husky shareholders would own 39 per cent.

Synergies from the transaction are expected to result in annual savings of $1.2 billion, largely achieved within the first year and independent of commodity prices, the companies said.

The transaction has been approved by both boards and is expected to close in the first quarter of 2021, pending shareholder and regulatory approvals.