The fallout from the merger of two oilpatch majors — Cenovus Energy and Husky Energy — is anticipated to land in downtown Calgary right this moment as employees start to obtain layoff notices.
The corporations introduced the $3.8-billion deal in October, with the goal of making a single enterprise that’s stronger and extra resilient. However, Cenovus has mentioned that 20 to 25 per cent of the mixed workforce would face job cuts.
The majority of the layoffs of 1,720 to 2,150 positions had been anticipated to happen in Calgary, the place the 2 corporations are headquartered. It’s anticipated these layoffs will happen in levels.
“As we have previously said when we announced the Cenovus-Husky transaction, the combination means there will be overlap and redundancies in a number of roles across our business that will result in workforce reductions taking place over the course of this year,” a Cenovus spokesperson mentioned in an announcement to CBC News on Monday.
Shareholders of each corporations accredited the deal final month.
Combining the businesses will create annual financial savings of $1.2 billion, the businesses have mentioned, largely achieved throughout the first yr and unbiased of commodity costs.
In October, the businesses instructed analysts about $400 million of the financial savings are anticipated to return from “workforce optimization,” together with financial savings from IT and procurement.
The merger combines Cenovus manufacturing of about 475,000 boe/d with Husky’s 275,000 boe/d. Their mixed refining and upgrading capability is anticipated to complete about 660,000 barrels per day.
The mixed firm will function as Cenovus Energy and stay headquartered in Calgary.
Rory Johnston, managing director and market economist at Price Street in Toronto, mentioned 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 past year because of the coronavirus epidemic and negative oil prices and a lot of sentiment barriers being breached,” Johnston mentioned.
He mentioned whereas he was shocked in October by the dimensions of the gamers concerned within the Husky-Cenovus deal, he believes it is a reflection of the broader pattern.
“This is a particularly large example of what I think will be a continuing trend in the patch of bringing assets together, particularly ones that are relatively close and could be logistically managed well together, reducing corporate overhead, and thus costs,” Johnston mentioned.
Generally, he mentioned, the upside of consolidation within the Canadian sector is a extra aggressive oilpatch globally, with decrease prices and the power to stay worthwhile at decrease total worth ranges.
But, Johnston mentioned, discuss of consolidation and value containment typically means fewer jobs.
“That is unambiguously a downside of these consolidations for the people that were employed in these sectors,” he mentioned.
The anticipated Husky-Cenovus job cuts come lower than every week after TC Energy introduced it was shedding 1,000 employees because it halted work on the Keystone XL pipeline following U.S. President Joe Biden’s determination to pull a key allow.