Time to panic? Layoffs loom large in Canada's oil patch: survey

Workers in Canada’s oil patch might be getting antsy about their jobs as the price of crude continues to hover around its lowest level in six years. And while a new survey suggests several companies are thinking about cutting back, producers don’t seem to be pushing the panic button yet.

According to the survey of 154 North American oil and gas companies by HR consultancy Mercer, 44 per cent plan to cut back on capital spending as a response to falling prices, while 16 per cent say they might cut staff. The study also said that about one-third will cut down on “buying” outside talent, while 7 per cent say they may start to look at asset sales or exiting certain markets.

So this is bad news for the industry, but consider the context: the price of oil is currently floundering around $50 a barrel, down from about $100 during the summer. For Joe and Jane SUV, this of course means they’re saving a ton on gas, but for the folks who make their living hauling the black stuff out of the ground, it’s a crisis.

Except it doesn’t seem to be quite yet.

“It’s not a wholesale kneejerk reaction,” Graham Dodd, a principle at Mercer, says of the companies’ response.“It’s a very considered reaction in terms of capex spend, in terms of reducing strategic operational cost. We’re not just seeing an over-the-board slash and burn approach.”

According to Dodd, the response from Canadian companies matched pretty closely with the overall result of the survey.

Of course, things aren’t a crisis until they are. And some companies have already begun to slow things down.

On Tuesday, UK-based BP became the latest big energy player to cut spending, joining companies like Cenovus Energy and Canadian Natural Resources. Top Canadian player Suncor, meanwhile, has cut $1 billion from its budget and is slashing 1000 jobs.

And the longer prices stay at this level, the more dire things become. Indeed, the survey was taken between Dec. 11 and Jan. 16, so the snapshot given may already be on the optimistic side. And if oil’s selling for $50 a barrel in two months, blood pressures will be considerably higher.

But while falling oil prices may be grabbing the headlines now, executives are still likely thinking about the fact that not too long ago, the big crisis on the oil sands wasn’t about cheap oil, but about availability of workers, says Dodd.

“Organizations are being very cognizant that while oil prices show short term volatility, labor market actually operate on a much longer cycle,” he said. “Short term actions taken now, if you are overly zealous, will severely impact your medium to long term prospects.”

In other words, the longer-term labour supply problem in the sector is still there, and a company too quick on the switch with the pink slips could find itself having trouble rehiring talent – particularly high-demand personnel like petroleum engineers - when prices rebound.

On Tuesday, the price of crude was solidly above $50 a barrel, having rallied from a low of less than $45 in late January.

“There will be players that actually come out of this — some later this year and into 2016 — actually come out of this stronger and fitter and more agile,” says Dodd.