CALGARY – A major U.S. camp provider cited falling oil prices and cancelled projects for its decision to layoff a third of its staff in Canada and close two of its lodges near Fort McMurray on Monday, a move that reflects a slowdown in Alberta’s once red-hot labour market.
WTI for February delivery fell $1.12 to close at $53.61 a barrel on the New York Mercantile Exchange. It was the lowest settlement since May 1, 2009
Houston-based Civeo Corp. announced Monday that it had reduced its Canadian workforce by 30% as a result of plummeting oil prices, and the fact that just a handful of new oilsands projects are expected to be built next year.
“There are few major oilsands construction or expansion projects forecast for 2015, reducing the demand for labour and accommodations,” Civeo president and CEO Bradley Dodson said in a Monday conference call. “Certain regions in the Athabasca oilsands region are oversupplied for rooms, negatively impacting our outlook for occupancy and average daily rate.”
As an oilfield service provider, Civeo said it was reacting to decisions by major oilsands producers to reduce capital expenditures over the course of 2015. The company did not say how many Canadian staff had been laid off so far, but hinted that more job cuts may be coming.
“We may have to look at closing additional locations there,” Mr. Dodson said, referring to northern Alberta. The company currently provides camp facilities for producers including Imperial Oil Ltd. at its Kearl Lake oilsands project and Suncor Energy Inc. at its Fort Hills oilsands project.
Civeo operates 11 lodges and mobile camps for workers in the oilsands as well as a handful of lodges in oil and gas producing parts of British Columbia, Saskatchewan, and Manitoba. However, the company has permanently closed one of its oilsands camps and temporarily closed a second as a result of high vacancy rates at its facilities.
“With the oil price decline, major oil companies have reduced their capital spending,” Mr. Dodson said.
“For our Canadian oilsands operations, we tracked the spending of several major oilsands producers, which over the past three months have announced year-over-year capital spending cuts of 15 to 20%.”
The Brent and West Texas Intermediate oil benchmark prices have dropped roughly 45% since June, and WTI closed Monday at a new five-year-low. WTI fell 2.1% Monday to close at US$53.61 per barrel while Brent fell to 2.6% to US$57.93 per barrel.
Analysts expect the low commodity prices to persist, which could impact employment levels in oil and gas producing regions like Alberta.
“We’re looking at a significant supply-demand surplus through the first half of 2015,” Tim Evans, an energy analyst at Citi Futures Perspective, said by phone. He said that any reduction in the growth of U.S. production could help limit the surplus but added, “it’s not going away anytime soon.”
In mid December, TD Economics predicted Alberta’s unemployment rate would increase to 5% next year and then rise further to 5.2% in 2016.
With files from Bloomberg