Cheap oil's victims: Civeo slashes over 1K jobs

CNNMoney's 2015 Playbook: Oil & Gas
CNNMoney's 2015 Playbook: Oil & Gas

Gas at $2 a gallon isn't good for everyone.

More than 1,000 employees at Civeo (CVEO), a provider of housing for oil workers, have lost their jobs in recent months. There's concern this is only the beginning of the energy sector layoffs.

Now that crude oil has plunged to nearly $50, Big Oil companies like ConocoPhillips (COP) are significantly dialing back spending. That's bad news for companies like Civeo that depend on the energy boom.

Civeo primarily houses people working in the Canadian oil sands industry, a previously red-hot area of the North American economy that relies on lofty oil prices to turn a profit.

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The announcement from the Texas-based company provides a reminder that while cheaper oil prices are a gift to millions of consumers, the selloff is also causing economic pain for some people who have benefited from the energy revolution.

More job cuts are expected, including at shale oil producers that don't survive the oil meltdown. Earlier this month Halliburton (HAL) said it plans to cut 1,000 positions, while BP (BP) announced an unspecified number of layoffs as part of a $1 billion restructuring program.

JPMorgan recently warned Texas may even sink into an oil-fueled recession.

Related: Tumbling oil could take thousands of jobs

Crude reality: Shares of Civeo plummeted 50% on Tuesday, a day after the company dropped a bombshell on investors.

Civeo warned of gloomy 2015 financial results due to slower spending by major oil companies in North America, especially in Canada's oil sands fields.

Civeo oil job cuts

Just look at the company's depressed occupancy rates: Just 35% to 40% of its lodge rooms in Canada are even under contract heading into 2015. That's down significantly from over three-quarters contracted at the start of 2014.

That's why Civeo said it has reduced headcount in its Canadian and U.S. operations by 30% and 45%, respectively, from levels at the start of 2014. The company told CNNMoney it employed 4,068 people as of the end of 2013.

Civeo said it closed two lodges in Canada and a manufacturing location in Australia. It's also assessing options for two U.S. locations.

Related: Fed chief says cheap oil is good for America

Dividend abandoned: Looking ahead, Civeo projects 2015 capital expenditures of $75 million to $85 million. That's a huge slowdown from this year's estimated capital spending of $260 million to $280 million.

Civeo further disappointed investors by abandoning its dividend to "maintain the company's financial flexibility." Instead of paying out a dividend, management plans to deploy excess cash flow and existing cash balances to pay down debt.

As if tumbling oil prices weren't enough, Civeo has been hurt by currency headwinds in its two biggest markets. The U.S. dollar has strengthened meaningfully against both the Canadian and Australian dollars in recent months.

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