Medicine Hat reeling after second fracking company announces pullout by Dan Healing, March 16, 2016, Calgary Herald
The second Calgary-based oilfield services company in two weeks has announced it is suspending operations at Medicine Hat, removing another 100 jobs from the southern Alberta city’s economy.
The news from Trican Well Service Ltd. on Wednesday follows a decision by Calfrac Well Services Ltd. on March 2 to shutter its facilities and lay off 200 people in the city where it was founded. [Will the companies pulling out end up benefiting the community by saving billions in health care costs, road and other infrastructure damages, food lands not ruined by intentional waste dumping, and water loss and contamination damages and more?]
“There will be a small core of people that remain employed in Medicine Hat but we won’t be offering active well site or well servicing services from this location,” said Rob Cox, vice-president of the Canadian region for Trican.
“We built the shop in 2002 … It’s been a very good operation for us. It’s strategically located for the shallow gas market. But that market is not anticipated to be active in the near term or in the next several years.”
Cox said many of the operators attached to the facility, which is technically in the small community of Redcliff, just northwest of the city, were commuting to work on crews in the much more active Grande Prairie area of northwestern Alberta. He said the majority of the operators have been laid off and only about a half-dozen managerial and support staff will remain.
The company has not made a decision on what to do with the facility itself. In the short-term, it will be used to store idle trucks and equipment associated with coiled tubing, acidizing and small-scale hydraulic fracturing services.
Trican has been steadily shrinking as it tries to deal with high debt and low utilization rates for its worldwide operations. It sold its Russian pressure pumping business to Rosneft Oil Co. for $197 million in August and has been winding down operations in Australia, Algeria, Saudi Arabia and Colombia.
On Wednesday, it announced it has completed the sale of its United States pressure pumping business to privately held rival Keane Group of Houston for US$200 million or Cdn$267 million in cash, plus equity in the buyer. About 650 U.S.-based workers are to leave Trican to work for Keane.
Last month, Trican said it had trimmed 160 jobs in Canada so far in 2016 and the cutting was expected to continue as it “rightsizes” after selling the U.S. division. It said its total workforce in Canada and its small international division would be 1,740 after the U.S. sale, down 75 per cent from the 6,741 employees it claimed worldwide as of Dec. 31, 2014.
Calfrac’s announcement two weeks ago noted a total of 500 jobs cut from its North American operations, bringing its total number of layoffs in the region to 2,300 during the current downturn and leaving Calfrac with 1,200 employees in Canada and the U.S.
Trican and Calfrac are best known for their pressure pumping trucks needed to hydraulically fracture or “frack” tight underground formations to allow trapped oil and gas to be produced.
More than 100,000 people are estimated to have lost their jobs in the Canadian oilpatch as oil prices fell from more than US$100 per barrel in June 2014. [Emphasis added]
Canada’s oil producers sitting on piles of cash, despite cutbacks by Jeremy van Loon, Bloomberg, March 16, 2016, Calgary Herald
Canada’s biggest oil producers are sitting on a near-record pile of cash, giving them the resources to keep investing and manage debt while weathering the worst price rout in a generation.
The five largest oil producers including Suncor Energy Inc. and Cenovus Energy Inc. have a combined $8.5 billion in cash and cash equivalents, an increase of 7.6 percent from a year earlier and more than twice the levels seen during 2009 downturn. The figures, which are little changed from a record $9 billion in 2014, don’t include the proceeds from Imperial Oil Ltd.’s recent sale of its Esso-brand gas stations for $2.8 billion.
“Sitting on cash and a healthy balance sheet has become a competitive advantage,” Amir Arif, an analyst at Cormark Securities Inc. in Calgary, said by phone. “These guys still have a lot of capital they need to spend.”
Divestitures, cost cutting, equity raises, and dividend cuts have helped bolster balance sheets as Canadian oil producers buckle down for the “lower for longer” prices Suncor Chief Executive Officer Steven Williams has described. Compared with the last downturn when commodity prices made a quick recovery, the industry isn’t betting on a return to high prices and needs the money to keep their operations expanding.
Imperial and Cenovus will also need to cash to develop assets using steam technology. Imperial Oil in a March 11 statement filed an application for an oil-sands project that would produce 50,000 barrels a day from 2022, while expansions at Cenovus’s Foster Creek and Christina Lake sites will begin producing oil in the third quarter, the company said in a Feb. 11 statement.
“Our No. 1 priority during this period of low oil prices is to maintain our financial resilience and the strength of our balance sheet,” Brett Harris, a spokesman for Cenovus, said in an e-mail. “We are going to be taking a very conservative approach to ensure that we don’t compromise the balance sheet strength that we’ve worked so hard to build over the last year or so.”
Canada’s largest oil producers had about $4 billion in cash in March 2009, as the price of crude began to climb from a low of just under $34 a barrel in 2008. Their cash reserves fell to $1.9 billion by 2011 as the recovery took hold and the industry began to expand again.
The spending, combined with the drop in prices, has taken a toll on balance sheets with debt now standing at an average of 2.16 times earnings before interest, taxes, depreciation and amortization, compared with 1.08 times last year, according to data compiled by Bloomberg.
The cash reserves are a “comfort,” in such an environment, said John Stephenson, chief executive officer of Stephenson & Co. Capital Management in Toronto, which oversees $55 million. … [Emphasis added]
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