Energy firms slash costs as layoffs forecast
CALGARY Total Energy Services Inc. is slashing its dividend and spending plans as the company expects rough times in the oilfield, including continued layoffs.
“Extraordinary times call for extraordinary actions,” Total Energy Services Inc. president and CEO Dan Halyk said on an earnings call Friday, during which the company announced it was suspending its dividend and slashing spending to prepare for a downturn in the oilfield. “We have to make tough decisions particularly in Canada,” Halyk said, noting that his company has continued to close field locations, rent out space Total owns to other companies, sell off equipment at auctions and lay off workers.
Total’s share price tumbled about five per cent at the close Friday to $2.63 per share, continuing a sharp slide that has persisted over the course of the week.
Since Monday’s stock market open, Total shares have fallen 43 per cent.
Halyk said the company is in a financial position to continue paying the dividend, but chose not to do so partly out of respect for laid off workers.
“When you’re laying people off and closing branches down, you’re not sending a very good message to your employees or to your customers to maintain a dividend in these circumstances so, it’s not just the monetary element. You lead by example,” he said. “We’re asking everyone in Canada to batten down the hatches and our owners are going to have to do the same thing. I’m the largest individual shareholder in the company so I don’t cut these things lightly, and our board doesn’t cut it lightly,” Halyk said.
Other energy sector players have also slashed their dividends and spending plans this week as oil markets crashed.
ARC Resources Ltd. cut its dividend by 60 per cent on Friday and reduced planned spending for the year by 45 per cent.
Husky Energy Inc. announced that it would reduce its planned spending for the year by $900 million on Friday, and would also move to cut its costs by $100 million and shut in oil and gas wells that are not economic at current oil prices.
The moves follow previous announced spending cuts by Cenovus Energy Inc., Ovintiv Inc., Birchcliff Energy Ltd., Pipestone Energy Corp., Seven Generations Energy Ltd. and others.
Oil stocks have plunged over the course of the week as the spread of the coronavirus knocks out oil demand in several large economies around the world and, at the same time, Saudi Arabia and Russia are massively boosting oil supplies as they enter into a price war.
West Texas Intermediate oil prices rose just under 1.5 per cent on Friday to US$31.96 per barrel.