Suncor Energy will layoff about 10%-15% of its employees due to a significant drop in oil prices, the impact of the pandemic and continued market volatility.
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Canada-based Suncor Energy (SU) had a total workforce of about 13,000 at the end of 2019. The layoffs will be carried out over the next one and a half years, including 5% cuts in the next six months.
The company informed the employees of the restructuring through an internal conference call with CEO Mark Little. The layoffs will take place throughout the organization and will be a combination of layoffs, voluntary buyouts and early retirement.
Suncor’s spokesperson Sneh Seetal said that the company was already implementing measures to improve its cost structure that would have led to a smaller workforce over time. But current events have accelerated the company’s cost reduction plans.
Suncor had entered the year with an estimate to spend between $5.4 billion and $6 billion but now anticipates spending about $3.8 billion. (See SU stock analysis on TipRanks)
“We believe that the company should trade at a modest premium vis-à-vis [its] peer group given its downstream integration and balance sheet liquidity, partly offset by mixed operational performance” states RBC Capital analyst Greg Pardy. He has a buy rating on the stock and C$25 price target.
Meanwhile on Sept. 30, Scotiabank analyst Jason Bouvier reiterated a Buy rating for Suncor but lowered the price target to C$27 from C$30.
Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 13 Buys, 1 Hold and no Sells. The average price target of $21.61 implies an upside potential of about 80%. Shares (on NYSE) have declined 63.4% year-to-date.
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