The fallout from the merger of two oilpatch majors — Cenovus Power and Husky Power — is predicted to land in downtown Calgary right now as staff start to obtain layoff notices.
The businesses introduced the $3.8-billion deal in October, with the intention of making a single enterprise that’s stronger and extra resilient. Nevertheless, Cenovus has stated that 20 to 25 per cent of the mixed workforce would face job cuts.
The vast majority of the layoffs of 1,720 to 2,150 positions had been anticipated to happen in Calgary, the place the 2 companies are headquartered. It is anticipated these layoffs will happen in phases.
“As we have now beforehand stated after we introduced the Cenovus-Husky transaction, the mixture means there shall be overlap and redundancies in various roles throughout our enterprise that can end in workforce reductions going down over the course of this yr,” a Cenovus spokesperson stated in an announcement to CBC Information on Monday.
Shareholders of each firms authorised the deal final month.
Combining the businesses will create annual financial savings of $1.2 billion, the businesses have stated, largely achieved throughout the first yr and impartial of commodity costs.
In October, the businesses informed analysts about $400 million of the financial savings are anticipated to come back from “workforce optimization,” together with financial savings from IT and procurement.
The merger combines Cenovus manufacturing of about 475,000 barrels of oil equal per day (boe/d) with Husky’s 275,000 boe/d. Their mixed refining and upgrading capability is predicted to complete about 660,000 barrels per day.
The mixed firm will function as Cenovus Power and stay headquartered in Calgary.
March towards consolidation in oilpatch
Rory Johnston, managing director and market economist at Worth Road in Toronto, stated there was a march towards consolidation within the Canadian oilpatch over the previous half decade with the downturn in crude costs.
“And that was exacerbated this previous yr due to the coronavirus epidemic and destructive oil costs and numerous sentiment obstacles being breached,” Johnston stated.
He stated whereas he was stunned in October by the dimensions of the gamers concerned within the Husky-Cenovus deal, he believes it is a reflection of the broader pattern.
“It is a notably giant instance of what I feel shall be a unbroken pattern within the patch of bringing property collectively, notably ones which might be comparatively shut and could possibly be logistically managed effectively collectively, lowering company overhead, and thus prices,” Johnston stated.
Usually, he stated, the upside of consolidation within the Canadian sector is a extra aggressive oilpatch globally, with decrease prices and the flexibility to stay worthwhile at decrease total worth ranges.
However, Johnston stated, discuss of consolidation and value containment typically means fewer jobs.
“That’s unambiguously a draw back of those consolidations for the those who had been employed in these sectors,” he stated.
The anticipated Husky-Cenovus job cuts come lower than every week after TC Power introduced it was shedding 1,000 staff because it halted work on the Keystone XL pipeline following U.S. President Joe Biden’s choice to pull a key allow.