Adelaide headquartered oil and gas giant Santos has joined miners BHP and Arrium in flagging job losses in South Australia.
After Arrium’s announcement last week of a 580-job hit at its Whyalla operations and BHP flagging job losses at Olympic Dam, Santos has told employees that it will be making redundancies due to the volatile oil price.
A Santos spokesman said the level of the job losses was being considered as part of a broader review.
“In December last year we announced a 25% reduction in capital expenditure for 2015 and also flagged a review of our operational expenditure,” the spokesman said.
“As part of this process, we are now focusing on pursuing all efficiency and productivity options and setting how the business will operate in this new, low oil price environment, including reducing our contractor workforce and implementing redundancies.
“The level of redundancies will be determined through this productivity and efficiency process.
“Despite the current volatility in the oil price, Santos remains committed to the development of the Cooper Basin, with a view to unlocking its full potential.”
In December, Santos chief executive David Knox insisted the company was in sound financial shape.
“The current volatile oil price means that Santos is focused on driving operational efficiency, reducing costs, prudently managing capital and making sure our balance sheet remains strong – without making short-term reactive decisions that could damage the long-term interests of the company or the interests of shareholders,” Knox said.
The volatility in oil prices continued in overnight markets.
Oil prices advanced following data that showed US oil companies cut drilling activity in response to low prices.
US benchmark West Texas Intermediate for March delivery gained $1.33 to close at $49.57 a barrel on Monday on the New York Mercantile Exchange.
European benchmark Brent oil for March delivery jumped $1.76 to $54.75 a barrel in London.
Analysts pointed to the weekly Baker Hughes rig count, which showed a record drop of 94 oil rigs to 1,223 for the week ending January 30.
The rig count was “very bullish,” said Michael Lynch of the consultancy Strategic Energy & Economic Research.
“It’s a logical move, people had not expected such a large drop and that supported the argument we’re going to see a near-term recovery in the market balance.”
The cuts in drilling rigs came on the heels of announcements by Chevron, ConocoPhillips and other major producers that they will slash capital budgets in 2015 in light of lower oil prices.
Traders were also watching a strike at nine US refineries after labour negotiations broke down between union leaders and refiners.
Only one of the nine refineries had curtailed production as a result of the strike, Bloomberg News reported.
The strike pushed up gasoline prices by about nine per cent since Friday on worries of constrained refined products supply.
However, analysts said the strike could have a bearish effect on oil prices because there would be less demand for crude supplies if refineries go off line.
– with AFP
