Penn West said Tuesday that it will axe about 400 positions and suspend its dividend in response to volatile commodity prices.
The Calgary-based company will reduce its workforce by 35 percent, or over 400 full time and contractor positions, with most of the cuts expected immediately.
The remainder of the workforce reduction is expected to be completed by the end of the year, the company said.
Most of the employees and contractors positions included in the cuts are located at the company’s head office in Calgary.
The headcount reduction is expected to save the company about $45 million per year.
The company’s board decided to suspend Penn West’s dividend until further notice following the payment of $0.01 per share divided on October 15.
The action is expected to reduce annual cash outlays by $20 million, the company said.
The company’s board also voluntarily decreased annual retainers payable to non-management directors.
The annual retainer payable to the board chair will be reduced by 50 percent, while the annual retainers payable to the remaining non-management directors will be reduced by 40 percent.
Over the last month, the company said it has identified $75 million of planned 2015 capital activity that will be deferred, an amount that is incremental to the $50 million capital spending reduction announced in its second quarter results.
The $500 million revised capital budget represents a 40 percent reduction from the company’s original November 2014 guidance of $840 million.
The company will limit capital expenditures in its 2016 capital program to estimated funds flow from operations on a full year basis.
Penn West added that it continues to be in compliance with all of the financial covenants in its syndicated bank facility and senior notes.
“We have made a number of exceptionally difficult decisions in order to remain competitive in the current commodity price environment. We view the cost reductions as sustainable and we will remain well positioned for the potential expansion of development activities and capital programs in the future,” Penn West president and CEO Dave Roberts said.