THE DOMINO EFFECT OF THE COLLAPSE IN OIL
PRICES: Suncor Energy cuts 1,000 jobs, trims capex by $1 billion. ALL OIL COMPANIES AND THEIR CONTRACTORS
CONTINUE TO TRIM THEIR EXPENSES, AS HAS HAPPENED DURING PRIOR BOOM-BUST CYCLES.
January 14, 2015
Suncor Energy said Wednesday that it will lay off 1,000
employees and cut $1 billion from its 2015 capital spending program in response
to plummeting crude prices.
Most of the job cuts will affect contractors although
employee positions within the Alberta based company will also be reduced.
Suncor currently has about 14,000 employees.
A hiring freeze for roles not critical to operations and
safety will also go in to effect.
Suncor did not comment on how long the hiring freeze
will last.
In addition to the $1 billion capital spending cut the
company will also implement “sustainable operating expense reductions” of
between $600 million to $800 million.
The operating expense cuts will be phased in over the
next two years to offset inflation and growth.
The company will also defer projects that have not yet
won final approval including the MacKay River 2 oil sands project and the Husky
Energy operated White Rose Extension.
Suncor has issued an update to its 2015 guidance to
reflect, among other items, reduced spending and lower pricing and related
assumptions.
The company’s production guidance for 2015 has not
changed.
“Cost management has been an ongoing focus, with
successful efforts to reduce both capital and operating costs well underway
before the decline in oil prices. However, in today’s low crude price
environment, it’s essential we accelerate this work,” Suncor CEO Steve Williams
said.
In a nutshell, the domino effect of the collapse in oil
prices continues. All oil companies and
their suppliers or contractors continue to trim their expenses, as has happened
during prior boom-bust cycles. The
period of the fat cows is followed by a period of lean cows.