National Post

Caterpilla­r warns of ‘severe and chaotic’ impact from virus.

What analysts are saying ahead of earnings

- Michael Bellusci Kevin Orland and

Canada’s big oil producers are set to give investors more evidence of how they’re battling plunging crude prices, the result of plummeting demand in the face of the coronaviru­s. Western Canada Select crude oil collapsed 90 per cent from February’s high to last week’s low.

Calgary- based Cenovus Energy Inc. and Husky Energy Inc. will post first- quarter earnings on Wednesday morning, with the former already temporaril­y suspending its dividend in a bid to save cash.

Both firms have already cut their 2020 production guidance.

Canadian energy companies have announced at least $ 7.6 billion in capital spending cuts for the year, a reduction of about 33 per cent from their originally projected budgets.

Production curtailmen­ts are poised to be a key focus for investors.

Analysts have estimated Canada may need to shutin about 1 million to 1.5 million barrels of oil per day, from an average daily production in 2019 of about 4 million.

Given the lack of crude demand coupled with low Canadian pricing and little in the way of extra storage capacity, “it is hard for us to fathom how Western Canadian crude production can avoid a ~ 1 million+ bbl/d drop in output in the coming weeks,” Stifel Firstenerg­y analyst Michael Dunn told clients in a note.

The virus has disrupted the industry’s operations as well. Imperial Oil Ltd.’s Kearl oilsands mine has been struck by an outbreak of the virus that has sickened at least 32 workers.

TC Energy Corp. has said social- distancing measures may slow constructi­on on projects such as its Coastal Gaslink pipeline.

Here’s what analysts are saying ahead of earnings:

RBC, Greg Pardy

Energy firms will further trim capital spending, update their efforts at cost reductions and potentiall­y adjust dividend levels.

“Liquidity measures appear sufficient for most companies to bridge the gap in 2020, but next year could be another story,” Pardy said.

Morgan Stanley, Benny Wong

“Expect the market to look past anticipate­d weak 1Q prints and focus on liquidity and ability to cut, store, & place production.”

Wong sees integrated firms carrying an advantage in navigating storage woes. He sees the highest negative cash flow revision risk for Cenovus and Husky heading into earnings results.

Canaccord, Dennis Fong

“Shut-ins and the residual impact of strong Q4 diluent pricing could further weigh on oilsands cash costs ( in addition to significan­tly lower realized pricing).”

Suncor remains Canaccord’s top pick among large-cap producers.

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