CALGARY – Canadian natural gas giant Encana Corp. says it will cut its workforce by 20 per cent, slash its dividend, close its office in Plano, Texas, and spin off a large portion of its Alberta assets into a new public company.
Encana (TSX:ECA) didn’t say how many jobs will be cut during the reorganization but said it would consolidate its office locations in Calgary and Denver.
As of late 2012 it had about 650 corporate staff out of a total workforce of nearly 4,200 in Canada and the United States.
“In order to align our organization with our strategy, we have had to make a number of exceptionally difficult decisions,” Encana CEO Doug Suttles said in a statement.
“The restructuring that is underway reflects our shift from funding about 30 different plays to focusing our resources on five key areas.”
“We will work as hard as we can to make these staffing decisions quickly and thoughtfully and we will treat everyone affected with respect as we work through this very difficult part of our transition.”
The Calgary-based company announced the reorganization early Tuesday about a month after Suttles, who became CEO in June, revealed his new management structure and team.
Encana also announced that its quarterly dividend will be cut to seven cents from 20 per share — a move that had widely been expected.
“The dividend is an important component of total shareholder return,” said Suttles. “The current level is consistent with maintaining a strong balance sheet in a volatile commodity price environment and recognizes the attractive investment options within our portfolio.”
Suttles was to address analysts later Tuesday at 6 a.m. Mountain Time (8 a.m. Eastern Time).
The company’s statement said about five million acres of Alberta lands and associated royalty interests, currently known as Encana’s Clearwater play, will be transferred to a new public company next year.
Encana said it would retain a significant stake in the new company.
Meanwhile, Encana will spend about three-quarters of next year’s capital budget on five resource plays that offer higher returns because they are rich in oil and natural gas liquids.
They include the Montney play in northeastern British Columbia and the Duvernay play in Alberta. The others are the DJ Basin, San Juan Basin and Tuscaloosa Marine Shale.
Like other natural gas producers, Encana has been struggling with persistently low prices. Many have adjusted by focusing more on oil or liquids-rich natural gas that offer higher margins.