Canada's Penn West Petroleum Ltd. on Tuesday announced a number of measures, including a lower budget and job cuts, to chop costs and said it would only spend cash it earned from operations, a step that will shrink its growth prospects.
It was the latest in a string of negative announcements from North American oil producers desperate to survive the slump in oil prices and taking any and all means to right their ships, batten down the hatches and await what they and analysts hope will be a price rebound in 2016.
ConocoPhillips also said on Tuesday it is laying off 400 employees and 100 contractors in Canada.
Penn West on Tuesday cut its 2015 capital budget for the third time, lowered pay for its board, suspended its dividend and said it would lay off 400 employees, or about a third of its workforce. It also cut its 2015 production forecast.
Shares of the company, which has oil reserves in Alberta, British Columbia, and Saskatchewan, Manitoba and the Northwest Territories, fell as much as 14.6 percent.
The moves were crucial to strengthening the company's balance sheet, Chief Executive Dave Roberts said.
"Limiting our capital programs to the funds flow generated from our assets and suspending our dividend are necessary steps," Roberts said in a statement.
The company, which has been selling assets to reduce debt, said it could cut even more costs later this year.
"It is an indication that they want to live within their means and they do not want to draw a lot of debt," CRT Capital analyst David Epstein said.
Penn West amended some of its debt covenants earlier in the year after it had trouble meeting some terms related to its cash flow.
The revised 2015 capital spending forecast, a 13 percent cut to C$500 million ($379.3 million), is 40 percent lower than Penn West's initial estimate of C$840 million set in November. Since then, it had cut its forecast in December and in July.
The company also said it expects spending in 2016 to be C$150 million to C$200 million lower than 2015.
Penn West expects to save about C$45 million per year due to the 400 layoffs, most of which will come at its Calgary, Alberta headquarters.
The company, which had about 1,120 employees as of Dec. 31, said it expects to record a related charge in the current quarter.
Penn West had in March slashed its quarterly dividend to 1 Canadian cent per share from 14 Canadian cents. The company said it expects to save about C$20 million by suspending the payout altogether from the quarter starting October.
The company cut its 2015 production forecast to 86,000 to 90,000 barrels of oil equivalent per day from 90,000 to 100,000.
Penn West's shares fell 15 Canadian cents to 88 Canadian cents. The stock's more than 78 percent drop since Nov. 17, when the company first set its 2015 capital budget, is steeper then the 31 percent decline in oil prices.
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