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Oil and gas producers have slashed billions of dollars from their capital budgets since the start of the COVID-19 crisis and the global oil price crash.
Royal Dutch Shell said Wednesday it would lay off up to 9,000 people worldwide as it deals with the fallout of the COVID-19 pandemic and begins restructuring to hit its goal of net zero emissions by 2050.
British energy giant BP announced in June that it would cut around 10,000 jobs, also as part of its net zero emissions plan.
Earlier this week, Calgary-based TC Energy confirmed it is also restructuring its Canada Gas Operations and Projects team, though the company declined to specify how many jobs would be affected.
In general, the oil and gas industry has been faced with lower prices and the inability to attract outside capital into the sector, said Jackie Forrest, senior director with ARC Energy Research Institute.
She noted that Canadian industry cash flow levels are expected to fall to $13 billion this year from $53 million in 2019.
“The lack of external capital and prices at this level I think will motivate more cost cutting from the industry,” she said. “The pressure at these prices is pretty severe.”
Analyst Phil Skolnick of Eight Capital said he was not surprised by the news of the Suncor job reductions.
“It just continues to go on in the sector. They are not going to be the only ones that we see doing that . . . as long as oil prices continue to be where they are, and stock prices continue to be doing what they are doing,” said analyst Phil Sklonick at Eight Capital.
Many producers were trying to avoid layoffs during the spring and summer, but are now having to look at cost reductions, Skolnick said.
“The headwinds on cash flow generation are still prevalent,” he said. “The companies need to figure out or think more about a lower-for-longer (oil-price scenario) still.”
With the decline in oil prices, Suncor’s share price has dropped by 64 per cent this year, closing Thursday at $15.50 on Toronto — and off from $28.57 seen in early June.
