It has been hard for the exploration and production companies to carry on their operations amid plunging oil prices for over six months. Many such entities have been forced to cut jobs to reduce their operating cost and protect profitability. And now, according to media releases, another company is following suit.
Due to the unfavorable business scenario, Talisman Sinopec Energy UK – a joint venture (JV) between Talisman Energy Inc (TLM) and China Petrochemical Corporation – has reportedly decided to lay off roughly 300 employees.
Talisman Energy is a Canadian energy explorer while China Petrochemical Corporation is the largest refining and petrochemical firm in Asia.
The price of both West Texas Intermediate (WTI) and Brent crude tumbled more than 50% since June last year, owing to plentiful supply of the commodity in the face of lackluster global demand. As a result, Talisman Sinopec has been forced to reduce its production as it would not be profitable to sell crude at such a low price. The operating cost for upstream activities is also increasing simultaneously.
Headcount reduction with an aim to lower the operating cost seems one of the options for the company to survive in the harsh business environment. Hence, out of the total 3,000 workforce in the JV, the company has asked 200 contractors and 100 regular workers to leave.
Among the other industry players, integrated energy major Royal Dutch Shell plc (RDS.A), upstream energy firm ConocoPhillips (COP) and integrated firm Chevron Corporation (CVX) have also reduced their headcount.
Calgary, Alberta-based Talisman Energy is an independent oil and gas exploration and production (E&P) company, with operations in North America (primarily Canada) and several international regions. The company conducts its operations in three principal geographic segments: North America, the North Sea and Southeast Asia.
Currently, Talisman Energy carries a Zacks Rank #5 (Strong Sell), implying that the stock will significantly underperform the broader U.S. equity market over the next one to three months.
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