In his first 100 days on the job, Encana CEO Doug Suttles made it clear that significant changes are in store for Canada's largest natural gas producer.
The company has seen its workforce drop by about 300 people so far this year and, when 3,800 employees gather for a town hall meeting with the new boss today, they will all be well aware Suttles has told investors current organizational structure is more aligned with Encana's past than its future. "Maintaining the status quo is not an option," Suttles has said.
When he steps onto the stage at the BMO Centre to address staff in Calgary, it will provide many of them their first real opportunity to see and hear the man who has been charged with reviving what was once Canada's dominant oil and gas producer. For some, it could also be the last time.
Suttles, who was hired from BP in June, has said Encana will develop fewer properties, bring in a new corporate structure and capital controls as well as better aligning its compensation with persistently low natural gas prices. The company, which had 4,197 employees at the end of 2012, has cut seven per cent of its staff in the first half of this year and
Suttles warned after the second quarter that further cuts - but not a general layoff- are likely through year end.
That's quite an introduction - his employees will be keen to see what he does for an encore.
They didn’t need to wait long. On Tuesday morning Encana announced five senior executives – including Jeff Wojahn, president, Eric Marsh, senior vice-president, of the USA Division – would be leaving as part of a new organizational structure.
“Doug wants to say it face to face with staff and take their questions,” company spokesman Jay Averill said in an e-mail Monday.
Suttles will hit the road this week to speak to staff in Colorado and Texas.
The issue of job security is bound to be top of mind for some in the audience but Suttles will present a clearer vision of his overall strategy for the $13-billion market cap company. He has said Encana will exit a number of its 28 plays in North America to focus on top assets such as the Duvernay in Western Canada and the Tuscaloosa Marine Shale in the Southern U.S. Suttles told the Barclays investment conference in September he would reveal details of the strategy in the weeks ahead and incorporate them in Encana's 2014 budget.
"We need to change in a big way, in a bold way," Suttles said in New York.
Those types of statements are bound to resonate through a company but Averill noted the sentiments were rooted in the company's internal feedback process.
"When change is spoken about it's quite natural for people to wonder how it will specifically affect them," said Averill. "Doug's comments about change ... were actually drawn from staffsurveys where the vast majority of staffhave said they want and expect significant change."
Encana has been in change mode for some time, selling assets - mostly dry gas properties - after losing half its market value since 2010. The stock has been held down by the pronounced decline in natural gas prices which began in 2008, the year before former CEO Randy Eresman spun out Encana's profitable oilsands business as Cenovus Energy.
Encana shares were up 21 cents in Toronto after the announcement Tuesday to $18.01 — still well off the 52-week high of $23.86. Encana shares were up 21 cents in Toronto after the announcement Tuesday to $18.01 — still well off the 52-week high of $23.86.
The changes promised by Suttles may be big and bold but they will pave the way to an era of restraint.
When natural gas were robust five years ago, the attitude in the oil and gas industry was for aggressive production growth. After the fracking revolution unlocked vast new supplies and prices collapsed, companies like Talisman Energy and Encana are putting a premium on financial discipline and profitable production.
Suttles has sought out internal and external assessments of Encana's assets and business strategy to augment his own review of the company's strengths and weaknesses. It's already shifted the focus from dry gas to produce higher value crude oil and liquidsrich gas.
While Eresman had been optimistic of a return to better natural gas prices, Suttles has warned North American gas prices will be "rangebound" from $3.50 to $4.50 US per million British thermal unit in the next few years. He's pledged to make capital discipline key to his strategy and has said Encana would "evaluate" its 20-cent quarterly dividend payment as part of its strategic review.
As part of his pledge to investors, Suttles has said "Encana will be back to winning" - it just this time around it may be winning small rather than winning big.