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UPDATED: Suncor announces job cuts and spending reductions

Suncor Energy Inc. has announced today major spending reductions to its 2015 budget due to low oil prices.

“Managing our cost has been an ongoing focus at Suncor for some time, the low crude price environment today has accelerated work that began in 2014, and as part of our plan we’re reducing capital spending by $1 billion, we’re reducing operating expenses by up to $800 million to be phased in over two years, we’re reducing or postponing non essential spending and we’re decreasing our workforce by 1,000 positions,” said Sneh Seetal spokesperson for Suncor Energy Inc. “This is a challenging time, and these are difficult decisions, we will move quickly and treat people with respect dignity and fairness.”

Suncor has not decided where the 1,000 positions will be cut, “exact numbers and specific locations are not yet determined, we need to assess the work that’s being done by our workforce in terms of our contract workers versus our employees. As well as the projects we need to defer to get a clear picture on where the reductions will be made,” said Feetal, who added that the  job losses are company wide.

Although in its release Suncor stated that the 1,000 job reduction will be done primarily through its contract workforce, in addition to reducing employee positions. There will also be an overall hiring freeze for roles that are not critical to operations and safety.

Suncor is implementing a number of initiatives to achieve the cost reduction targets. These include deferral of some capital projects that have not yet been sanctioned, “MacKay River 2, has not been sanctioned, as such a sanctioned decision on this project would be deferred until market economic conditions improve. The West White Rose Extension was scheduled to bring on about 8,000 bbl/d net to Suncor in 2018, that has been delayed by at least a year. The operator for that project would be Husky [Energy Inc],” added Seetal.

There will also be a decrease in discretionary spending. Budgets affecting the company’s safety, reliability and environmental performance have been specifically excluded from the cost reduction program.

“Our integrated model and strong balance sheet have positioned us well for the price downturn,” said Steve Williams, president and chief executive officer in a press release. “Cost management has been an ongoing focus, with successful efforts to reduce both capital and operating costs well underway before the decline in oil prices. However, in today’s low crude price environment, it’s essential we accelerate this work. Today’s spending reductions are consistent with our commitment to spend within our means and maintain a strong balance sheet. We will monitor the pricing environment and take further action as required.”

The Fort Hills and Hebron projects will move forward as planned. According to Suncor these are long-term growth projects that are expected to provide strong returns when they come online in late 2017.

“The strategic decisions we’ve made are consistent with our unwavering focus on capital discipline and operational excellence,” said Williams. “We will continue to carefully manage our spending priorities: sustaining safe, reliable and environmentally responsible operations, providing a meaningful, competitive dividend for our shareholders and investing in profitable growth.”

Employees were not notified ahead of today’s press release.

Updated to include Suncor quotes at 5:35 p.m