CALGARY — With Petro-Canada (TSX:PCA) and Suncor Energy Inc. (TSX:SU) set to merge into the biggest energy company in Canada on Saturday, the companies are continuing to prune overlapping positions from the top down.
Petro-Canada chief executive Ron Brenneman, on his company’s final quarterly conference call as an independent firm, said the absolute number of cuts has not been worked out yet.
“Our focus is more on working our way down through the various levels in the organization and trying to get to people as quickly as we can and provide some certainty about where their future lies,” he said Thursday.
“We’ll start with the CEO. We only need one CEO, so that’s a 50 per cent redundancy, and it kind of works its way down through the various levels.”
Suncor chief executive officer Rick George will head up the merged company, and Brenneman will serve as executive vice-chairman.
In April, about a month after the multibillion-dollar merger was announced, the combined company unveiled its senior management team, which includes more Suncor names than those from Petro-Canada.
Earlier this week, Petro-Canada said the companies were working their way through the next tier, the vice-president level.
After that, there will likely be more cuts in departments like finance, human resources and IT.
“If you look at where the redundancies would appear, where you’ve got overlap, it’s typically in the corporate groups,” Brenneman said.
There will also be overlap in natural gas and oilsands businesses, since both companies had their own operations in those areas.
However, the same number of staff will be needed to run Suncor and Petro-Canada’s combined refinery operations, which George has said the company has no intention of selling.
Staff in the offshore and international departments will also likely be unchanged, Brenneman said.
Suncor and Petro-Canada announced in March that they planned to combine into an energy giant with a market capitalization of more than $43 billion, rivalling the Royal Bank of Canada (TSX:RY) for the top spot on the Toronto Stock Exchange.
Shareholders gave the union their blessing in June and the Competition Bureau approved the merger earlier this month, on the condition Suncor sell some 104 gasoline stations in southern Ontario.
Petro-Canada shares will continue trading on the TSX for another week, but will be delisted from the New York Stock Exchange on Monday.
It said it would cease to pay dividends as a result of the merger, adding that future dividends would come from the merged entity.
Petro-Canada said it managed its business in a prudent manner during the second quarter, putting it in a good position heading into the merger.
Sluggish oil prices took a big bite out of Petro-Canada’s profits, which dropped 95-per-cent in the April-June period.
Net earnings were $77 million, or 16 cents a share, for the quarter ended June 30, down sharply from year-earlier profits of $1.5 billion or $3.10 per share.
Operating earnings were also dragged down by comparatively lower oil prices and production volumes, plunging 91 per cent to $99 million from $1.2 billion booked during the same quarter of 2008.
Quarterly oil and gas production averaged 374,00 barrels of oil equivalent per day, down from the average of 414,000 barrels produced the year before. Production decreased in eastern Canada and internationally, while production in the oilsands remained relatively flat.
Petro-Canada shares rose more than three per cent to $44.07 a share in morning trading on the TSX Thursday.