Encana to cut its workforce by 20 percent
CALGARY, Alberta (AP) — Canadian natural gas giant Encana Corp. said Tuesday that it will cut its workforce by 20 percent, slash its dividend, close its office in Plano, Texas, and spin off a large portion of its Alberta assets into a new public company.
Since taking the reins in June, former BP executive Doug Suttles has signaled that huge changes would be coming for natural-gas focused Encana, which has long struggled with low commodity prices.
Suttles has previously said Encana would become a leaner, more profitable company under his leadership. On Tuesday he expanded on that, announcing Encana would focus on its five best resource areas across North America, instead of juggling 30 different areas.
Encana will be closing its Dallas-area office and consolidating work in Calgary and Denver. As of late 2012, Encana currently had just over 4,000 full-time employees.
“We need to align our organization with our strategy, both in terms of scale and in structure,” Suttles told analysts on a conference call.
The job cuts should be mostly complete by the end of this year, Suttles said. He recently announced a reorganization of the company’s management ranks, which included the departure of five executives.
Encana also announced that its quarterly dividend will be cut to seven cents from 20 cents per share, a move that had widely been expected.
The company’s statement said about 5 million acres (2 million hectares) of Alberta lands and associated royalty interests, currently known as Encana’s Clearwater region, will be transferred to a new public company next year. Encana holds the oil and gas rights on those lands — which stretch throughout huge parts of the province — and can collect royalties on production.
Suttles was unable to divulge many details on the Clearwater play, as Encana is preparing to take that company public around the middle of next year. He said he expects there to be strong interest in the initial public offering, as most of the cash flow from the royalty interest will be doled out to investors.
“The intention of taking this public is to unlock the potential that this opportunity affords,” he said.
Encana plans on putting non-core natural gas assets on the sale block, but Suttles stressed that those divestitures aren’t necessary for his strategy to be successful. The company does intend to hang on to some of those properties though.
Encana expects next year’s capital spending to be around $2.5 billion, though it will flesh out the details next month. About 75 percent of that will be on five resource regions that offer higher returns because they are rich in oil and natural gas liquids.
They include the Montney area in northeastern British Columbia and the Duvernay area in Alberta. The others are the DJ Basin, San Juan Basin and Tuscaloosa Marine Shale in the United States.
Encana shares rose 4.6 percent to $19.45 in mid-morning trading on the Toronto Stock Exchange.