Talisman Energy Inc. (USA) (NYSE:TLM) announced it is cutting its head office workforce by up to 15%in an effort to continue cost cutting measures intended to neutralize plunging commodity prices. Somewhere between 150 to 200 employees and contractors will be relieved of their positions within the head office structure as the company looks to scale its budget back by 30%. . The company currently employees about 1300 people and is based in Canada.
Talisman is facing a dilemma shared by most participants in its sector as large declines in wholesale oil prices force them to cut budgets in order to compensate for lower revenues. Oil prices are currently at a 6-year low and there isn’t much optimism for future escalation. Capital spending is one of the few opportunities for cost-cutting companies in the sector enjoy and pink slips for employees are always part of that equation. Wholesale oil prices have a direct effect on margins and this created a seriously challenging environment for smaller producers like Talisman.
The company recently agreed to be acquired by Repsol, a Spanish-based company. The deal is for $8.3 billion and is slated to close by the middle of 2015. The company announced that the job cuts were not part of the deal and the decision was made by Talisman Energy Inc. (USA) (NYSE:TLM)’s executives. They also noted that once Repsol takes over the company, many of the positions they are currently eliminating will be redundant. The deal for the acquisition was agreed upon last December. Repsol’s profit had tripled during the fourth quarter of 2014 and they had originally offered $13 billion for the company. Their profits were bolstered by higher margins and also the advantage of Brazilian output, which they increased by 371k barrels, or 16%. This was while Talisman’s profits were dwindling as the company struggled to maintain margins in the tough pricing environment.
The stock is trading sideways and will continue to do so until the acquisition is complete.