Penn West Petroleum Ltd. (TSX: PWT; NYSE: PWE) is taking further actions in response to the current commodity price environment, including limiting its capital expenditures, suspending its dividend and reducing board compensation, and reducing the company’s cost structure through a 35% workforce reduction.
The job eliminations represent more than 400 full-time employees and contractors, with most of this reduction being effective immediately. The remaining job cuts will be completed by the end of the year. Most of the employees and contractors being eliminated are located in Penn West’s head office in Calgary, Alberta, Canada. The total cost savings associated with this workforce reduction are expected to be approximately $45 million per year.
As part of Penn West’s efforts to control spending and reduce drilling risk while maximizing the value of its land base, the company will continue to actively pursue farm-out opportunities. Over the last year, Penn West has been successful in securing approximately 91 gross well commitments, of which 39 have been spud to date. Through these farm-out agreements, the company expects to receive income from these wells through either a royalty interest or working interest structure without having to fund any of the capital outlays.