Calgary – Trican Well Service Ltd., founded in Lloydminster, has reduced its Canadian workforce by 35 per cent after cutting 2,000 employees from its North American operations due to prevailing weak demand for its oilfield services.
All Canadian operations and corporate employees have taken a second pay cut of 10 per cent to this year along with reduced benefits.
The latest cutbacks for Canadian workers took effect on April 15, and are expected reduce quarterly costs by about $5 million.
The Calgary-based company said the cost cutting measures will remain in place until demand and activity levels in Canada improve.
Meanwhile, Trican is currently in negotiations to sell its Russian and Kazakhstan pressure business after receiving an unsolicited purchase offer.
Trican said the sale of the business would be in the best interest of shareholders if accepted terms and conditions can be negotiated.
Trican also expects to park 35 per cent of its Canadian equipment over the remainder of the year with customer demand expected to remain well below 2014 levels.
The company does, however, expect Canadian industry activity to increase from June onward.
Trican’s focus going forward is to continue to reduce costs in difficult current and future market conditions as Canadian pressure pumping activity is down substantially from 2014 levels.
To that end, the company has stopped paying dividends to its shareholders as of May 12, when they released their first quarter financial report for the three months ending March 31.
Trican issued a $22.4 million dividend in the quarter, but reported further payouts have been suspended indefinitely to preserve capital as a result of weak economic conditions.
The number of wells drilled in Canada was down 46 per cent relative to the same quarter in 2014.
Trican noted that many Canadian producers opted to defer well completions during the first quarter of 2105 which negatively affected the demand for its fracturing services.
The average Canadian pricing declined by 10 per cent in the quarter compared to the fourth quarter of 2014 when the industry was hit by a steep drop in oil prices that took hold in November.
The steep decline in utilization and prices has set Trican on a mission to reduce its cost of sales in 2015 for consumable products and transportation costs that make up half of their total costs.
The company reported a $35.7 million loss in the quarter and a $60.3 million adjusted loss as the demand for their services plunged with oil and gas prices.
Total revenue in the quarter was $476.1 million, compared to $643.2 million for the same period in 2014.
The company’s Canadian operations generated $222 million of revenue, down from $353.3 million a year earlier.
Trican expects to cut approximately $115 million from fixed annual costs with workforce and salary cuts, but the savings in the first quarter were offset by severance costs.
Most of the employee cuts in Canada occurred in mid-March, too close to the end of the quarter for savings to be realized.
Severance costs were $5.5 million in Canada, $2.9 million in the U.S. and $1 million for the corporate division.