Canadian energy firms pile on losses as virus dents demand
Three major Canadian oil and gas producers piled on more losses in the third quarter, hammered by a steep decline in oil prices as pandemic- led travel restrictions crushed fuel demand.
Integrated producer Suncor Energy Inc. Wednesday cited challenges with operational performance and an industry-wide decline on the back of low demand for its products.
“We are disappointed with our recent operational performance so we are strengthening our focus on the company’s commitment to reliability,” CEO Mark Little said.
Canada’s second- biggest oil company also said it would accelerate previously announced workforce reductions of up to 15 per cent over the next 18 months, as it looks to rein in spending.
The pandemic- driven crash in global crude prices has heavily impacted North American oil and gas companies, forcing them to undertake extensive measures, including costs and production cuts, dividend suspensions and some project deferrals, to stay afloat.
Oil prices fell more than four per cent on Thursday to their lowest since mid-june, extending the previous day’s sharp decline on the potential impact renewed coronavirus lockdowns will have on oil demand.
Suncor said it produced 616,200 barrels of oil equivalent per day ( boepd) in the quarter, down from 762,300 boepd in the year- ago quarter. Refinery utilization averaged 87 per cent compared to 100 per cent a year earlier.
The Calgary- based company posted a net loss of $12 million, or 1 cent per share, in the quarter ended Sept. 30, compared with a profit of $1.04 billion, or 67 cents per share, a year earlier.
“The focus remains on the 2021 outlook, with key questions being whether Fort Hills will eventually ramp to full rates in an uncurtailed environment,” said Peters & Co, referring to Alberta government’s decision last week to scrap production limits.
On Thursday, Cenovus Energy Inc. reported its third-straight quarterly loss, just days after announcing a buyout of rival Husky Energy Inc. The COVID-19 crisis has added to the woes of Canada’s energy sector, under stress since the last downturn in 2014, and is forcing companies to look to consolidation, job cuts and cost savings.
Cenovus kicked off consolidation in the Canadian energy patch with a $3.6-billion deal to buy Husky, and said it plans to cut up to a quarter of the combined work force. Cenovus said total quarterly production rose 5.2 per cent to 471,799 barrels of oil equivalent per day ( boepd), despite Alberta’s mandatory caps, as it used output from oil sands and curtailment credits purchased from other firms.
Alberta will lift curbs on crude production ahead of schedule at the start of December, as coronavirus-related shutdowns ease pipeline congestion.
Cenovus in the third quarter took an impairment charge of $450 million associated with the Borger, Texas, refinery it co-owns with Phillips 66, reflecting reduced demand for refined products in the current market scenario.
“The impairment charge reflects current market conditions surrounding reduced demand for refined products, and the expectation of continued lower market crack spreads in the market,” Phil Skolnick, analyst at Eight Capital, said in a note to clients.
The Calgary- based company recorded a net loss of $194 million or 16 cents per share, for the third quarter ended Sept. 30, compared with a year-ago profit of $187 million, or 15 cents per share.
The focus remains on the 2021 outlook.
Also on Thursday, Husky Energy reported a third- quarter net loss of $ 7.08 billion compared with a year- ago profit of $ 273 million, hurt by a non- cash impairment of $ 6.7 billion related to lower long- term oil price assumptions and reduced capital investment.
Non- cash impairments totalled $ 6.7 billion ( after tax) and were related to lower long- term commodity price assumptions and management’s decision to reduce capital investments. In addition, higher discount rates were used based off of a number of factors and market indicators, including the recently announced combination with Cenovus, Husky said in a statement.
“While the quarter gets overshadowed by the recently announced merger with ( Cenovus) ... it probably makes the bears on the proposed merger even more skeptical today on the combined cash flow potential,” Eight Capital’s Skolnick wrote.
At the close of trading Thursday in Toronto, Suncor was up .60 per cent to $ 15.09. per share, Cenovus fell 4.14 per cent to $4.40 per share and Husky dropped 1.96 per cent to $3.50.