A global economic “train wreck” caused by actions to control the COVID-19 pandemic will likely continue to destroy value for some time and the only strategy is to try to minimize the damage, the CEO of Husky Energy Inc. said Wednesday.
The Calgary-based company slashed its dividend as it reported a $1.7-billion loss in its first quarter mainly due to impairment charges related to the plunge in crude oil prices.
“It was clear from what we were seeing on the product demand side in North America that we were going to see supply and demand collide in a very messy way this quarter,” said CEO Rob Peabody on a conference call.
“Our strategy is to keep as many barrels away from the train wreck as possible to minimize negative cash margin.”
He said Husky has shut-in 80,000 barrels per day of Canadian upstream oil, while its U.S. refineries are processing about 100,000 fewer barrels per day because of lower fuel demand in the United States.
Storage levels are still filling but at a slower rate, Peabody said, adding that he believes oil supply and demand in North America will balance soon “because they have to.”
Husky announced its quarterly dividend is being cut by 90 per cent to 1.25 cents per share, down from 12.5 cents per share.
Its loss for the first quarter amounted to $1.71 per share compared with a profit of $328 million or 32 cents per share in the same quarter a year earlier.
The loss included $1.1 billion in non-cash asset impairment charges primarily related to the company’s upstream assets in North America due to lower crude oil price assumptions, as well as $274 million in lower value of its inventory.
Funds from operations for the quarter totalled $25 million or two cents per share, down from $959 million or 95 cents per share in the first three months of 2019.
Husky shares gained 36 cents or 9.8 per cent at $4.02 in late morning trading on the Toronto Stock Exchange.