By Olivia Roger
Encana Corporation announced Tuesday it will be cutting their workforce by 20 per cent and closing their Plano, Texas office.
The Calgary-based natural gas producer announced their restructuring plan earlier than expected as Encana president and CEO Doug Suttles hopes to put the company back on track as weak natural gas prices have threatened the industry.
Encana’s long-term plan is to invest 75 per cent of its capital into five oil and liquids-rich resource plays in North America. They hope they can improve cash flow by 10 per cent.
Suttles told Humber News it has been a tough day on their staff at the Plano office.
“So that we can be dynamic and responsive with moving capital around to market conditions and operating results, we think it’s best to concentrate the management of our activities in two locations, Denver and Calgary” Suttles said.
Suttles however remains optimistic about the industry.
“In the long-term I’m a believer that demand will grow. We have a massive resource base here in North America which can fuel opportunities around the world. The oil sands actually pull a lot of gas with them, and we’re seeing new markets develop,” says Tuttle.
“In the short-term, my expectation is that the commodity price will be roughly in the range its trading in today.”
Andrew Miall, a professor of geology at University of Toronto who specializes in gas and oil politics, told Humber News that the announcement is not a disaster but just a cyclical change that goes on in the oil and gas business all the time.
“The professional workforce in Calgary is extremely mobile and I suspect the vast majority of the professionals there in Calgary will find new jobs without too much trouble, they tend to move around a lot between companies anyway.”
Joseph Triepke, a Texas energy investor and analyst, told Humber News this restricting plan is an attempt by management to appease investors and increase earnings.
“Cutting staff and capital expenditures, as implied by this plan, is a tactic many of Encana’s gas-levered peers have taken over the past 12-24 months, and shouldn’t come as a big surprise.”
Triepke says he finds Suttle’s plan to focus resources on five key areas interesting, as this represents a new trend in the exploration and production model in North America.
“Before the companies were more explorers, now they are more producers. This requires a smaller staff, and is a trend to watch in E&P companies all across North America over the next couple of years. On the other hand, this same trend may make oil service companies head counts rise. Service companies providing fracking and well construction services in these key basins are understaffed to serve this manufacturing trend and desperately need more people.”
Encana expects to spend approximately $2.5 billion for 2014 and will provide more strategic details in mid-December.