Energy companies continue job cuts amid low oil prices, COVID-19 pandemic

Click to play video: 'Western Canadian Select  oil price dips below zero, WTI also dropping on Monday'
Western Canadian Select oil price dips below zero, WTI also dropping on Monday
Everyone is watching the price of oil this week after the prices plummeted over the weekend, when Western Canadian Select briefly dropping into the negative range. As Tom Vernon explains, West Texas Intermediate was also approaching negative territory on Monday – Apr 20, 2020

A move by Husky Energy Inc. to halt production of 80,000 barrels per day takes the total reduction in Canadian crude output to about 365,000 bpd since the onset of measures to deal with the COVID-19 pandemic, an analyst says.

That’s more than seven per cent of national production of 5.1 million bpd in December.

On Monday, the Calgary-based company also announced a reduction of $700 million in its 2020 capital budget, its second following an earlier cut of $900 million in capital and $100 million in other spending this year.

Its capital budget for this year is now about $1.7 billion, just over half of the $3.3 billion budget announced in December.

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“We have taken immediate action to preserve our balance sheet and core business in this commodity price environment,” said CEO Rob Peabody.

“As the market rebalances supply with demand over a very short period in North America, negative cash margins before operating costs are occurring. Reducing production minimizes our negative cash margin exposure.”

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Analyst Phil Skolnick of Eight Capital says the Husky production cuts, mainly from its oilsands and heavy oil operations in Alberta and Saskatchewan, take the total announced in Canada so far to 365,000 bpd.

He said the cuts are needed in the current price environment but questioned why Husky hasn’t also reduced its dividend to save money.

Last week, Houston-based ConocoPhillips Co. announced it would reduce production by May at its Surmont thermal oilsands project in northern Alberta by 100,000 bpd to 35,000 bpd because of low prices.

Earlier, Suncor Energy Inc. said it would reduce production at its two-train Fort Hills oilsands mining project to one train, resulting in a production cut of about 70,000 bpd.

Many analysts are projecting that Canadian production could fall by more than one million barrels per day if prices remained depressed in the face of global production that still exceeds demand despite an agreement by OPEC and other producers to limit output.

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Also Monday, fellow Calgary-based producer Crescent Point Energy Corp. cut its capital spending plan for a second time and reduced its production guidance for the year.

The company lowered its capital spending guidance to about $675 million, down from its original budget of $1.15 billion.

It also lowered its annual average production forecast by 20,000 barrels of oil equivalent per day or about 15 per cent to about 112,000 boe/d for 2020.

Crescent Point says the revision is largely due to the shut-in of higher cost production and its decision to shift capital spending to the latter part of the year.

Cathedral Energy Services Ltd. and McCoy Global Inc. also both announced job cuts, reductions to executive pay and lower capital spending plans on Monday.

Cathedral says it has cut its office and shop staff by 22 per cent, while the remaining Canadian non-field staff has moved to a four-day work week with a corresponding 20 per cent reduction in salary.

The company also cut its CEO and executive vice-president salaries by 25 per cent, while board retainer fees have been reduced by the same amount.

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McCoy announced an unspecified reduction in its headcount as well as salary and wage cuts across all levels of the organization including board and president and CEO cuts of 25 per cent and 20 per cent for other executives.

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